This week’s study question from the Solomon Online Exam Simulator question database is now available.
Question (Relevant to the Series 62, Series 65, Series 66 and Series 79):
All of the following are true of futures contracts except:
Answers:
A. A futures contract is an agreement to buy or sell an asset at a future date
B. Futures contracts are traded on exchanges
C. Futures contracts trade in standard units
D. Purchasing a futures contract represents a right to do something rather than an obligation to do something
Correct Answer: D
Rationale: A futures contract is an agreement to buy or sell an asset at a future date. Futures contracts trade on exchanges in standard amounts. For example, 5,000 bushels of soybeans is one futures contract. Futures contracts are different from options contracts because they always involve an obligation on both sides of the contract. For example, purchasing a futures contract represents an obligation to deliver or receive an asset on a future date. If the buyer does not want to receive the asset on this date, he can trade the position before the exercise date.
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