CPT Commodities & Futures Trading 2

Question 1

What is the 'basis' in commodity trading?

Accepted Answer

The difference between the futures price and the spot price of a commodity

Answer

The minimum price movement allowed in a futures contract

Answer

The total commission paid to a broker per futures trade

Answer

The overnight interest charged on a leveraged futures position

Question 2

A grain elevator manager sells wheat futures to lock in a price for upcoming harvest. This is an example of:

Accepted Answer

Hedging

Answer

Speculation

Answer

Arbitrage

Answer

Scalping

Question 3

Which commodity futures contract is priced in U.S. dollars per troy ounce?

Accepted Answer

Gold

Answer

Crude oil (WTI)

Answer

Natural gas

Answer

Corn

Question 4

What does 'open interest' measure in a futures market?

Accepted Answer

The total number of outstanding (unsettled) futures contracts

Answer

The total number of futures contracts traded in a single session

Answer

The percentage of contracts held by commercial hedgers

Answer

The daily price range of a futures contract

Question 5

What is a 'margin call' in futures trading?

Accepted Answer

A request from a broker to deposit additional funds when account equity falls below the maintenance margin level

Answer

A call option embedded within a futures contract

Answer

An exchange notification that a contract is approaching expiration

Answer

A fee assessed when a trader holds a futures position overnight

Question 6

Which of the following is a key feature that distinguishes futures contracts from forward contracts?

Accepted Answer

Futures contracts are standardized and exchange-traded; forwards are customized and OTC

Answer

Futures contracts involve physical delivery; forwards are always cash-settled

Answer

Futures contracts have no expiration dates; forwards expire quarterly

Answer

Futures require no margin; forwards require full payment upfront

Question 7

What is the 'limit move' rule in futures markets?

Accepted Answer

A price movement restriction beyond which trading in that contract is halted or restricted for the day

Answer

A rule capping the number of contracts one trader can hold

Answer

A minimum trade size required to participate in institutional futures markets

Answer

A regulatory cap on leverage ratios for retail futures traders