Question

please answer questions 5-10

Answer the following questions or fill in the gaps: 1. The first modern derivatives market was established in _ USA. __risk has to do with the fact that a party may fail to meet the obligations. 3. (Forward / futures) contracts are more flexible to my needs, like tailored suits. 4. If I only want to have rights, I must buy / sell) (futures / options) - 5. If I want to have the obligation to buy, I should buy / sell) a (call/put) option. 6. If an "in the money" option is exercised, will I obtain profits? 7. Every all open positions in futures contracts must be settled. 8. Derivatives can be used as a or as an is the supervisor of the MEFF Spanish derivatives market. 10. Futures contracts are negotiated in markets and forward agreements in markets.

Answer 1

Answer,

5.If I want to have the obligation to buy,I should buy a put option.

Hint:When You write a call,you may be obligated to sell shares at the strike price any time before the expiry date. When you write a put,you may be obligated to buy shares at the strike price any time before expiration.)

6.If an " In the money option is excercised, It is not always make profit. It is depends on the premium which paid.

( An Option that is in the money does not necessarily mean the trader is making a profit on the trade.The The expenses of buying option and any commission fee must also considered.)

7.Every business day/ last trading day all open positions in future contract must be settled.

8.Derivative can be used as a mitigation of risk (hedging) or as an assumption of risk.

9.Spain's financial authority is the superwiser of the MEFF spanish derivatives.

10.Future contracts are negotiated in Secondary market and forward agreements are in primary market.