Financial Quiz: Derivatives and CFD Trading

Question 1 of 14

Who are derivatives mainly available to?

Hedge Funds

Pension Funds

All answers provided are correct

Asset management firms

Question 2 of 14

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

Via stock market

Via mutual funds and exchange-traded funds

On eBay or Amazon

Via the derivatives exchange

Question 3 of 14

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

Derivatives are at the more speculative end of the risk spectrum

Derivatives are very illiquid

Some derivatives are illegal in certain countries

Derivatives have a very high tax levied on them

Question 4 of 14

What are the two main reason for buying derivatives?

Speculation and hedging

Dividends and hedging

All answers provided are correct

Speculation and dividends

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

Standard trading flow

Hedging

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.

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?

Contract size

Contract expiry date

No answers provided are correct

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?

No answers provided are correct

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

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

When an investor sells an asset

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 $250

None, because ‘going long’ is not investing

Made $50

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?

Made $250

None, because ‘going short’ is not investing

Lost $250

Lost $50