Institute for Financial Markets

Introduction to the Futures and Options on Futures Markets

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  1. What is a futures contract?

  2. What is an option or an option on a futures contract?

  3. What are call and put options?

  4. What is the "underlying" of a futures or options on futures contract?

  5. What are the major differences between various types of derivatives?

  6. What are the economic purposes of futures?

  7. What is a "derivative"?

  8. How can you sell (go short) something you don't own?

  9. Do you always have to make or take delivery on a futures contract?

  10. How do futures markets differ from stock markets?

  11. Where are futures and options on futures traded?

  12. How is futures trading conducted?

  13. Is futures trading regulated in the U.S.?

  14. What is a margin call?

  15. How do you figure the gain or loss on a futures contract?

  16. Can you give an example of how futures are used to hedge?

  17. Can you give an example of how one of these futures hedges would work in practice?

  18. Where can I get more information about Futures and Options on Futures Markets?

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