Futures contracts:
A) Are identical to forward contracts except for the length of time until the settlement date.
B) Provide an option to purchase an asset at a specified price on the settlement date.
C) Are marked to the market on a daily basis.
D) Cannot be resold.
E) Are limited to contracts on financial assets.

Question

Quizplus · Accepted Answer

Futures contracts are distinct from forward contracts in several ways, one of the most significant being that they are marked to market daily. This means the contracts are adjusted for the gain or loss in value each day according to the market movements. Unlike forward contracts, which are private agreements between two parties, futures contracts are standardized and traded on exchanges, allowing them to be bought and sold by different parties. This also means they can cover a wide range of assets, not just financial ones, and they do not provide an option to purchase but rather an obligation to buy or sell at a specified price.

Futures Contracts