Financial Quiz

Question 1 of 14

Who are derivatives mainly available to?

Asset management firms

Pension Funds

All answers provided are correct

Hedge Funds

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 stock market

Via the derivatives exchange

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?

All answers provided are correct

Speculation and dividends

Dividends and hedging

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?

True

False

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

Standard trading flow

Statement is wrong

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:

All answers provided are correct

Indices

Commodities

Question 9 of 14

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

Contract type

Contract size

Contract expiry date

No answers provided are correct

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

When an investor buys an asset

No answers provided are correct

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 investor sells an asset

No answers provided are correct

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

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?

Made $50

None, because ‘going long’ is not investing

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 $50

Lost $250

Made $250

None, because ‘going short’ is not investing

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Trading Glossary

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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

International Securities Identification Number (ISIN)

ISIN stands for International Securities Identification Number this is an alphanumeric code with 12 characters that can be issued for shares, bonds, options, derivatives and futures. For example, Apple’s ISIN is US0378331005. The...

The most common word

Bias

Bias in trading is a psychological phenomenon, in which an investor makes a decision based on their pre-conceived ideas of what will or won't work without considering the evidence. Bias may also manifest itself in retaining an asset for too...

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?

Looking for more?

Trading Glossary

International Securities Identification Number (ISIN)

Bias

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