What is the relationship between futures pricing and the price of the underlying asset?

Futures pricing always moves in the opposite direction of the asset's price. Futures pricing is unrelated to the asset's price. Futures pricing generally follows the asset's price but can diverge due to factors like interest rates and dividends. Futures pricing is always higher than the asset's price.

What does the 'basis of spread' in futures trading refer to?

The difference between the buying and selling price of a futures contract. The total number of futures contracts available for trading. The difference between the spot price and the futures price of an asset. The risk-free rate of return used in futures pricing calculations.

What is the primary function of margin in futures trading?

To determine the daily settlement price of futures contracts. To ensure that both parties fulfill their obligations on contract expiry. To calculate the potential profit or loss of a futures contract. To predict the future price movements of the underlying asset.

Which futures pricing model assumes perfect market efficiency and eliminates arbitrage opportunities?

Expectancy Model Cost-carry Model Dividend Discount Model Black-Scholes Model

What is the key factor considered in the Expectancy Model of futures pricing?

Historical price trends of the underlying asset The net carrying cost of the underlying asset The expected future spot price of the underlying asset The risk-free rate of return