STC questions with complete
solutions graded A+
Switch order - ANS ✔✔order whereby the trader offsets his original position through an
opposite trade on the same exchange in the dame delivery month and at the same time re-
establishes his original position in a later delivery month
Commodity Futures Contract - ANS ✔✔agreement entered into between a buyer and seller on
the floor of an exchange
standardized contract set by a particular exchange that will include the size, the point for which
delivery will be made, which is a warehouse or depository approved by the exchange, the grade
of the commodity that is to be delivered, and the price of the transaction
Commodity Futures Buyer - ANS ✔✔to take delivery of the cash commodity and pay the seller
the contract price
Commodity Futures Seller - ANS ✔✔deliver the cash commodity for which he will receive the
contract price
Offsetting definition - ANS ✔✔both the buyer and the seller may remove the obligation of
making and taking delivery of the cash commodity
Cash Forward Transaction - ANS ✔✔an agreement between buyer and seller for the delivery of
a specified amount of the cash commodity to be delivered at a specified time and price at a
specified delivery point
,Cash Forward Contract - ANS ✔✔could be for any amount of the cash commodity and for any
quality as agreed by the buyer and seller
non-transferable agreement between the buyer and the seller
Futures Contract - ANS ✔✔are always for specific amounts of the commodity and for a specific
grade of the commodity
both the buyer and the seller may transfer their obligation to a third party without permission
is negotiated on an exchange, with is a central marker where all purchases and sale orders are
channeled to a single location
if the price moves in an adverse direction, causing a decrease in equity, the member firm would
be required to deposit additional margin
Transaction in Futures - ANS ✔✔is made on the floor of the exchange between brokers who are
members of the exchange
Cash Forward Contract vs. Futures Contract - ANS ✔✔futures contract is not personally
negotiated between the buyer and the seller it is always for a specified grade and amount of the
commodity and it is delivered from locations and times specified in exchange rules
corner exists "squeeze" - ANS ✔✔an individual or group of individuals acting in concert
accumulates all or substantially all of the available supply of a commodity. By controlling the
cash commodity, they are able to dictate the pride that a seller must pay for the cash
commodity in order to make-delievery on his short position
long - ANS ✔✔is used to describe an individual who has an actual cash position
,if he has purchased a futures contract that is still open
short - ANS ✔✔is used to describe an individual who has an obligation to deliver the cash
commodity but does not own it
sold a futures contract that is still open
hedge - ANS ✔✔is the establishment of a futures position that is opposite to a cash position
purpose is to establish a temporary substitute for a cash market transaction that will be made at
a future date
to shift his risk of loss on the cash commodity due to adverse price change
making a futures purchase or sale to serve as a temporary substitute for a cash market
transaction that he will make at a later date
Speculator - ANS ✔✔individual who buys a commodity if he anticipates a price rise or sells a
commodity if he anticipates the price decrease
buy and sell futures for the purpose of making a profit
long (buys futures) position when he anticipates that the price will rise
short position (sells futures) when he anticipates that the price will fall
, futures exchange - ANS ✔✔producer or user of the cash commodity will be able to obtain credit
from banks and other lenders at a more favorable rate if his position is hedged
CFTC Commodity Futures Trading Commission - ANS ✔✔responsible for supervising trading
exchange - ANS ✔✔provide facilities for members to conduct trading in commodity futures and
to ensure that members conduct business in a manner that is just as equitable
the grades that are believable, the delivery months, how and where delivery will be made and
the size of the contract.
establishes the amount of margin that a customer must deposit initially and that he must
maintain in his account subsequently
establishes rules for the prevention of price manipulation
designates which warehouse are "regulatory for delivery," which means those that may be used
as depositories from which deliveries are made
for inspection of the cash commodity by inspectors who are licensed by the exchange
Arbitration exchange Committee - ANS ✔✔settles disputes arising between members, member
firms, and the public
Business conduct exchange committee - ANS ✔✔investigates complaints against members, acts
to prevent price manipulation, and supervises the conduct of members, members firms and
their employees to ensure compliance with the appropriate rules
solutions graded A+
Switch order - ANS ✔✔order whereby the trader offsets his original position through an
opposite trade on the same exchange in the dame delivery month and at the same time re-
establishes his original position in a later delivery month
Commodity Futures Contract - ANS ✔✔agreement entered into between a buyer and seller on
the floor of an exchange
standardized contract set by a particular exchange that will include the size, the point for which
delivery will be made, which is a warehouse or depository approved by the exchange, the grade
of the commodity that is to be delivered, and the price of the transaction
Commodity Futures Buyer - ANS ✔✔to take delivery of the cash commodity and pay the seller
the contract price
Commodity Futures Seller - ANS ✔✔deliver the cash commodity for which he will receive the
contract price
Offsetting definition - ANS ✔✔both the buyer and the seller may remove the obligation of
making and taking delivery of the cash commodity
Cash Forward Transaction - ANS ✔✔an agreement between buyer and seller for the delivery of
a specified amount of the cash commodity to be delivered at a specified time and price at a
specified delivery point
,Cash Forward Contract - ANS ✔✔could be for any amount of the cash commodity and for any
quality as agreed by the buyer and seller
non-transferable agreement between the buyer and the seller
Futures Contract - ANS ✔✔are always for specific amounts of the commodity and for a specific
grade of the commodity
both the buyer and the seller may transfer their obligation to a third party without permission
is negotiated on an exchange, with is a central marker where all purchases and sale orders are
channeled to a single location
if the price moves in an adverse direction, causing a decrease in equity, the member firm would
be required to deposit additional margin
Transaction in Futures - ANS ✔✔is made on the floor of the exchange between brokers who are
members of the exchange
Cash Forward Contract vs. Futures Contract - ANS ✔✔futures contract is not personally
negotiated between the buyer and the seller it is always for a specified grade and amount of the
commodity and it is delivered from locations and times specified in exchange rules
corner exists "squeeze" - ANS ✔✔an individual or group of individuals acting in concert
accumulates all or substantially all of the available supply of a commodity. By controlling the
cash commodity, they are able to dictate the pride that a seller must pay for the cash
commodity in order to make-delievery on his short position
long - ANS ✔✔is used to describe an individual who has an actual cash position
,if he has purchased a futures contract that is still open
short - ANS ✔✔is used to describe an individual who has an obligation to deliver the cash
commodity but does not own it
sold a futures contract that is still open
hedge - ANS ✔✔is the establishment of a futures position that is opposite to a cash position
purpose is to establish a temporary substitute for a cash market transaction that will be made at
a future date
to shift his risk of loss on the cash commodity due to adverse price change
making a futures purchase or sale to serve as a temporary substitute for a cash market
transaction that he will make at a later date
Speculator - ANS ✔✔individual who buys a commodity if he anticipates a price rise or sells a
commodity if he anticipates the price decrease
buy and sell futures for the purpose of making a profit
long (buys futures) position when he anticipates that the price will rise
short position (sells futures) when he anticipates that the price will fall
, futures exchange - ANS ✔✔producer or user of the cash commodity will be able to obtain credit
from banks and other lenders at a more favorable rate if his position is hedged
CFTC Commodity Futures Trading Commission - ANS ✔✔responsible for supervising trading
exchange - ANS ✔✔provide facilities for members to conduct trading in commodity futures and
to ensure that members conduct business in a manner that is just as equitable
the grades that are believable, the delivery months, how and where delivery will be made and
the size of the contract.
establishes the amount of margin that a customer must deposit initially and that he must
maintain in his account subsequently
establishes rules for the prevention of price manipulation
designates which warehouse are "regulatory for delivery," which means those that may be used
as depositories from which deliveries are made
for inspection of the cash commodity by inspectors who are licensed by the exchange
Arbitration exchange Committee - ANS ✔✔settles disputes arising between members, member
firms, and the public
Business conduct exchange committee - ANS ✔✔investigates complaints against members, acts
to prevent price manipulation, and supervises the conduct of members, members firms and
their employees to ensure compliance with the appropriate rules
