Financial Quiz: Derivatives and CFD Trading

Question 1 of 14

Who are derivatives mainly available to?

Hedge Funds

All answers provided are correct

Asset management firms

Pension Funds

Question 2 of 14

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

Via the derivatives exchange

Via stock market

On eBay or Amazon

Via mutual funds and exchange-traded funds

Question 3 of 14

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

Some derivatives are illegal in certain countries

Derivatives have a very high tax levied on them

Derivatives are very illiquid

Derivatives are at the more speculative end of the risk spectrum

Question 4 of 14

What are the two main reason for buying derivatives?

Dividends and hedging

All answers provided are correct

Speculation and dividends

Speculation 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”.

Statement is wrong

Hedging

Speculation

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.

True

False

Question 8 of 14

CFDs offer the ability to trade the following assets:

Indices

All answers provided are correct

Commodities

Question 9 of 14

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

No answers provided are correct

Contract size

Contract expiry date

Contract type

Question 10 of 14

What does a ‘long’ position mean in CFDs?

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

When an investor buys an asset

No answers provided are correct

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

Question 11 of 14

What does a ‘short’ position mean in CFDs?

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

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

When an investor sells an asset

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?

Lost $250

None, because ‘going long’ is not investing

Made $50

Made $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?

Made $250

Lost $50

Lost $250

None, because ‘going short’ is not investing