Describe why investors may choose to use futures contracts as part of their investment strategy.(10 marks)...
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Describe why investors may choose to use futures contracts as part of their investment strategy.(10 marks)
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What is meant by a protective put and why would an investor use it. (15 marks)
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What type of view would you expect an investor to have if buying a straddle, give an example?(10 marks)
Homework Answers
Investors use futures contract as part of their investment strategy due to following reasons :-
1) Leverage: Futures contract provide leverage, thereby enabling a person to gain higher exposure in lieu of smaller margin.
2) Hedging: Futures contract allow a person to completely hedge their market exposure, by short-selling equivalent number of Futures contract. It helps protect an investor in case of a sudden down-turn of market.
Add Answer to:
Describe why investors may choose to use futures contracts as
part of their investment strategy.(10 marks)...
questions 29-32 please 29. What strategy could be considered insurance for an investment in a portfolio...
questions 29-32 please
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1. Which of the following trades implies that ownership has been taken? a. Buying a futures...
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questions 29-32 please
29. What strategy could be considered insurance for an investment in a portfolio of stocks? A. Covered call B. Protective put C. Short put D. Straddle E. None of the above 30. Why is the buyer of an option not required to post margin under the Option Clearing Corporation rules? A. Once an option is purchased, no further money is at risk B. The writer pays all the costs C. The credit worthiness of the buyer covers...
A. Why is market efficiency a good thing for investors? (5 marks) B. Describe two style-based anomalies and give your opinion on why they persist? Said another way, given that people know they exist why do they not disappear? (5 marks) C. What is Prospect Theory? Explain how it affects investors' decision-making process. (5 marks) D. If an investment has a Sharpe ratio of 2, what is this telling us? Explain why the Sharpe Ratio is an important metric in...
QUESTION 13 A futures contract on copper traded at the Chicago Mercantile Exchange has a denomination of 25,000 pounds. Today you enter into a long futures position of 10 contracts on copper at $3.33 per pound, maturing in 6 months. If copper is trading at $3.24 at maturity, what is your net profit from this position? QUESTION 14 You expect that the stock of GoPro, currently trading at $70 per share, will be volatile in the next three months, and...
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Describe an export subsidy, and explain the gains and losses that might arise from such a practice s. a. (5 marks) b. Why are developing countries in Africa especially affected by export subsidies in industrial countries? (5 marks) 9. In 2012, the Canadian dollar appreciated against the US dollar. Explain the effects of this appreciation on each of the following. (10 marks) a. Canadian importers of goods from the United States b. Canadian firms that sold commodities to US buyers...
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