Futures contracts:
A)are identical to forward contracts except for the size of the contract.
B)provides 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 marked to market on a daily basis, which means that the gains and losses are calculated and settled every day. This helps to ensure that both parties are meeting their obligations and reduces the risk of default. Options provide the option to buy or sell an asset at a specified price, but futures contracts are a binding agreement to buy or sell an asset at a specific price on a future date. While futures contracts are primarily used for financial assets such as commodities, currencies, and stock market indices, they can also be used for physical assets such as crude oil or gold.

Futures Contracts