Which of the following derivative contracts is likely to be profitable if Australian stock prices fall...
Which of the following derivative contracts is likely to be profitable if Australian stock prices fall sharply? Multiple Choice
Buy VIX futures
Buy SPI put options
Sell SPI futures
All of the answers provided
Homework Answers
The correct answer is - All of the answers provided.
Option 1 is correct - Sharp falls in stock prices are usually accompanied by rising volatility. Thus, VIX futures will rise in value.
Option 2 is correct - Put options gain in value with a fall in the price of the underlying asset
Option 3 is correct - A short position in the futures will be profitable because the futures position will gain if stock prices fall
Add Answer to:
Which of the following derivative contracts is likely to be
profitable if Australian stock prices fall...
A portfolio manager for Prudential Investments Limited manages a diversified Australian share portfolio, but is concerned...
A portfolio manager for Prudential Investments Limited manages a diversified Australian share portfolio, but is concerned that stock prices are likely to fall over the next three months. The manager decides to hedge by selling 400 SPI 200 futures contracts at 4955. Three months later, when the position is closed out, the contract is trading at 5010. Calculate the profit or loss on the futures transactions. Multiple Choice $550 000 profit $550 000 loss $1 375 000 loss $1375 loss
The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are...
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Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and other...
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. Which of the following statements is CORRECT? a. One advantage of forward cont...
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An oil exploration & production company wants price protection from falling oil prices. That is they...
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1. Based on the data given, which of the following options is most likely to exhibit...
1. Based on the data given, which of the following options is
most likely to exhibit the largest gamma measure?
A. Option I
B. Option J
C. Option K
D. None of the answers
2. If Wayne uses option K contract to hedge its position and
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most likely need to take the following action to maintain the same
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A. Sell options because the put delta has become...
please answer questions 5-10 Answer the following questions or fill in the gaps: 1. The first...
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...
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An oil exploration & production company wants price protection from falling oil prices. That is they will be selling oil and so want to hedge against oil prices declining. They decide to buy a put option on oil futures to protect against falling prices. But they want a lower cost of hedging and decide to construct a collar strategy. Which of the following will they do (select only one response)? (a) Buy a call option (b) Sell a call option...
1. Based on the data given, which of the following options is
most likely to exhibit the largest gamma measure?
A. Option I
B. Option J
C. Option K
D. None of the answers
2. If Wayne uses option K contract to hedge its position and
HG’s share price subsequently dropped from $38 to $36, Wayne would
most likely need to take the following action to maintain the same
hedged position:
A. Sell options because the put delta has become...
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...
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