Quiz 16: Stock Index Futures and Options

Business

False Explanation: In February 1982, the Kansas City Board of Trade began trading futures on a stock index, the Value Line Index.

False Explanation: Currently, futures and options relate to such indexes or averages as the Dow Jones Industrial Average, the Standard & Poor's 500 Stock Index, the NASDAQ 100 Stock Index, and many other market measures.

True Explanation: The stock index futures market is purely a cash-settlement market. There is never the implied potential for future delivery of the Standard & Poor's 500 Stock Index. An investor simply closes out, or reverses, his position before the settlement date. If he does not, his account is automatically credited with his gains or debited with his losses, and the transaction is completed.