Financial Quiz

Question 1 of 14

Who are derivatives mainly available to?

All answers provided are correct

Pension Funds

Hedge Funds

Asset management firms

Question 2 of 14

What is the simplest way for a retail investor to buy into derivatives?

Via mutual funds and exchange-traded funds

Via the derivatives exchange

Via stock market

On eBay or Amazon

Question 3 of 14

Why is it especially important to know what derivatives you are investing?

Some derivatives are illegal in certain countries

Derivatives are very illiquid

Derivatives have a very high tax levied on them

Derivatives are at the more speculative end of the risk spectrum

Question 4 of 14

What are the two main reason for buying derivatives?

Speculation and hedging

Speculation and dividends

All answers provided are correct

Dividends and hedging

Question 5 of 14

Is the quote “Institutional investors tend to make up their core portfolio with derivatives, to provide a secure annual income” true or false?

False

True

Question 6 of 14

What is the following case an example of: “If a portfolio contains corporate bonds, credit default swaps can be used as insurance against default on those bonds”.

Speculation

Hedging

Statement is wrong

Standard trading flow

Question 7 of 14

A CFD is an agreement between two parties that guarantees the difference between an asset’s current price and its price at contract expiry will be settled by the losing party.

False

True

Question 8 of 14

CFDs offer the ability to trade the following assets:

Commodities

Indices

All answers provided are correct

Question 9 of 14

Described as one of CFDs disadvantages, which of the following is fixed?

Contract type

No answers provided are correct

Contract size

Contract expiry date

Question 10 of 14

What does a ‘long’ position mean in CFDs?

When an asset is bought/sold as a long-term investment

When an investor buys a long range of different assets to minimise risk

No answers provided are correct

When an investor buys an asset

Question 11 of 14

What does a ‘short’ position mean in CFDs?

When an investor sells an asset

When an asset is bought/sold as a short-term investment

When an investor buys a short (small) range of different assets

No answers provided are correct

Question 12 of 14

Do investors actually own the shares of the companies that they’ve bought in CFDs?

Yes

Question 13 of 14

Imagine if you’ve called a long position for 50 Rocking shares when they were at $20 in CFD and at contract expiry they went to $25. How much money did you make/lose?

None, because ‘going long’ is not investing

Made $50

Made $250

Lost $250

Question 14 of 14

Imagine if you’ve called a short position for 50 Rocking shares when they were at $20 in CFD and at contract expiry they went to $25. How much money did you make/lose?

Lost $250

None, because ‘going short’ is not investing

Lost $50

Made $250

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Trading Glossary

1988

That's the number of terms in our glossary.

Do you know your CFDs from your IPOs or ETFs? Remove the mystery with our definitions glossary.

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Term of the day

Underlying Asset

In derivatives trading, an underlying asset is the financial instrument represented by a derivative , and is what gives a derivative its value. An underlying asset often takes the form of a stock or a commodity , but it can be any asset...

The most common word

Broker

A broker is the intermediary between an investor or trader and securities exchange. Brokers are the facilitators of liquidity in the financial system, and key players in the markets. Here we take a look at the broker definition in...

Financial Quiz

Who are derivatives mainly available to?

What is the simplest way for a retail investor to buy into derivatives?

Why is it especially important to know what derivatives you are investing?

What are the two main reason for buying derivatives?

Is the quote “Institutional investors tend to make up their core portfolio with derivatives, to provide a secure annual income” true or false?

What is the following case an example of: “If a portfolio contains corporate bonds, credit default swaps can be used as insurance against default on those bonds”.

A CFD is an agreement between two parties that guarantees the difference between an asset’s current price and its price at contract expiry will be settled by the losing party.

CFDs offer the ability to trade the following assets:

Described as one of CFDs disadvantages, which of the following is fixed?

What does a ‘long’ position mean in CFDs?

What does a ‘short’ position mean in CFDs?

Do investors actually own the shares of the companies that they’ve bought in CFDs?

Imagine if you’ve called a long position for 50 Rocking shares when they were at $20 in CFD and at contract expiry they went to $25. How much money did you make/lose?

Imagine if you’ve called a short position for 50 Rocking shares when they were at $20 in CFD and at contract expiry they went to $25. How much money did you make/lose?

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Trading Glossary

Underlying Asset

Broker

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