Futures Exam 2
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| show | False
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| True or False: Hedging removes all risk | show 🗑
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| show | Output Hedge
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| What does narrowing indicate when looking at basis from the short hedger stand point? | show 🗑
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| What information is needed for expected profits? | show 🗑
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| show | Cash market strengthens (stronger basis)
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| In short hedging, if the basis narrows, what happens? | show 🗑
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| show | Short
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| True or False: If a hedger maintains opposite positions in the cash and futures market, it is no longer considered a hedge. | show 🗑
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| show | Weak, this is bad for short hedgers
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| Stronger basis will hurt the __ hedger and benefit the __ hedger. | show 🗑
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| What is an example of a cross hedge? | show 🗑
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| Using a similar contract for something that doesn't have a futures contract, but it is correlated to the price of your commodity. | show 🗑
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| show | Selective Hedge
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| Any and all hedges are ____. | show 🗑
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| What is the rule of thumb on the basis for a product when hedging in a main production area of a commodity? | show 🗑
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| A short hedger will realize a price greater than target price if? | show 🗑
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| show | False, falling prices
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| In a short hedge, what does a hedger do to protect him/herself against falling prices? | show 🗑
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| What can a long hedge be used for? | show 🗑
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| show | Allows to continue a hedge for additional months; offsets an original contract; opens a new position
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| show | Negative
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| show | Place a hedge, but observe you can get a better target price, then roll the hedge forward
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| show | The trader makes money if the basis decreases, and loses money if basis increases
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| True or False: Hedging can reduce price risk and also generate prices. | show 🗑
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| When does price risk occur for a feed lot operation? | show 🗑
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| show | To reduce risk
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| show | Long
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| show | January, because it is close to expiration but still actively trading
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| True or False: To continue a hedge for an additional month by offsetting the original contract while simultaneously initiating a new hedge in the same month this is called a rolling hedge. | show 🗑
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| What would a long hedger hope to expect to see from prices if he is buying now? | show 🗑
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| show | Opening futures price and expected basis
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| The cash market price and the futures market price is ___ correlated. | show 🗑
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| show | Basis weakens and benefits the long hedger
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| show | Protection against fluctuations
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