Financial Risk Manager Part 1

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Which of the following is correct regarding futures prices and spot prices?

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A

Futures prices may vary widely from the spot price of the underlying asset, but the two prices will typically converge as a futures contract approaches maturity.

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B

Arbitrageurs keep the futures price and the underlying spot price close to each other throughout the life of the contract.

C

If the futures price is above the underlying spot price during the delivery period, a trader can profit by buying futures contracts and selling the underlying asset in the spot market.

D

The S&P 500 futures contract has the most trading activity of any futures contract due to its requirement to take physical delivery on the delivery date.

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