Show graphically and explain the profits and losses of buying futures relative to buying call options.

Q: What is the Futures and Options Market? What are the features? Provide information about the Futures…

A: Futures contract is a legal contract which is standardized in nature. The contract is used by market…

Q: Describe the basis of Futures contracts and discuss the potential risks and rewards.

A: An agreement where there are two parties, say one is a buyer and another one is a seller decides to…

Q: Explain the difference between a call option and a long position in a futures contract.

A: Both the options and futures are derivative contracts.

Q: Critically explain with examples the concept of futures and the differences between options and…

A: Futures in a type of derivative product in which there is a contract that is agreed in between two…

Q: a) Futures contracts and options on futures contracts can be used to modify risk. Required:Identify…

A: The derivatives are the contract which obtains its value from some underlying asset and earns return…

Q: Briefly explain the pay-off structure of futures and options contract. Also make it more clear with…

A: Futures are the derivative contract where you get the rights as well as the obligations. For example…

Q: Compare and contrast the commitments taken on by the following:   A futures contract seller versus a…

A: A futures contract seller is a party who has agreed to sell a particular asset at a particular…

Q: Discuss the payoff structures for call and put options and the determinants of call and put option…

A: Since you have asked multiple question, we will solve the first question for you. If you want to any…

Q: Discuss the factors giving rise to an inverted futures market for a storable versus a non-storable…

A: The inverted futures market for storable goods exists when the short-term deal costs are more…

Q: What is the purpose of initial and maintenance margins? How does marking to market affect the amount…

A: Margins: Margins allow individuals who'd like to trade to borrow funds from brokers or brokerage…

Q: Explain how a company can use the futures market to hedge against rising rawmaterials prices.

A: Answer: If the price of key raw materials is rising, then a company can hedge against the risk by…

Q: Discuss the advantages and disadvantages of using options to hedge as compared to using futures…

A: Introduction: The future is the financial instrument of the derivative market in which a buyer and…

Q: “Hedging is the basic function of futures market”. Discuss the statement in the light of uses of…

A: Hedging means constructing a fence around it. In financial markets hedging implies eliminating the…

Q: What is a futures contract, and how are futuresused to manage risk? What are you protectingagainst…

A: Answer: Future contracts are an agreement to buy or sell anything on a specified future date. Two…

Q: Identify the fundamental distinction between a futures contract and an option contract, and briefly…

A: Fundamental difference between a futures and option contract lies in following parameters:…

Q: What is a normal market for futures? What does an inverted futures curve indicate?

A: The future refers to the legal agreement between the buyer and the seller to exchange underlying…

Q: Carefully compare and discuss the concept of margins in forwards/futures markets and options…

A: Margin is the amount that is deposited as a security in the derivative contracts.

Q: se your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is…

A: Spot price is the current market price of a security at which it can be traded in the market, that…

Q: What is ‘basis’ and what is ‘basis risk’ within the context of futures hedging. Briefly discuss what…

A: Future markets are derivative products that means they derive the prices from the underlying assets…

Q: Discuss the difference between forward and futures contracts, focusing on the pros and cons of each.

A: Hedge:   An investment strategy that is formed to reduce the risk of the adverse price movement of…

Q: Compare and contrast the commitments taken on by the following:  A futures contract buyer versus a…

A: In a futures contractIt is a contract entered in which the buyer who agreed to buy the particular…

Q: Explain the difference between a put option and a short position in a futures contract.

A: The question is based on the basic concept of derivatives contract, an investor can create different…

Q: Changes in what price lead to gains and/or losses in futures contracts?

A: changes in underlying asset leads to gains and/or losses in future contracts.

Q: Explain how the futures markets can be used to reduce interest rate and input price risk.

A: A contract in which a seller & a buyer has an obligation to sell or buy an asset for a…

Q: a) Futures contracts and options on futures contracts can be used to modify risk.Required:Identify…

A: Future contracts:  The future contracts are legal derivative contracts to buy or sell an underlying…

Q: Spot vs. Futures prices Briefly explain the following: a. Basis b. Contango c. Backwardation

A: Spot price: The current price of a security at which it can be bought or sold at a specific location…

Q: Match the vocabulary

A: Organized Market - Organized market is a centralized market (either an exchange or a computer…

Q: Interest rate swap is widely used by portfolio managers. Describe an example of how a manager can…

A: Forward contracts are the one wherein one circulation of future interest payments is swapped for the…

Q: Answer the following in a couple of sentences  c) Compare and contrast forwards with futures. d)…

A: Forward contract and future contract are good hedging options both are similar but there are some…

Q: What are advantages of futures options over spot options?

A: Futures: The contract to buy or sell assets at predefined prices but will be paid and delivered…

Q: Briefly explain the pay-off structure of futures and options contract. Also make it more clear with…

A: Payoff is profit and loss forecast or likely profit with change in underlying price. Whenever…