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Answer: The exchange defines the underlying asset (quality), contract size, delivery months, and delivery arrangements
**Correct answer: C. The exchange defines the underlying asset (quality), contract size, delivery months, and delivery arrangements** In an exchange-traded futures contract, the exchange standardizes the contract terms. For a wheat futures contract, the exchange specifies the **grade/quality of wheat**, **contract size**, **delivery months**, and **delivery procedures/locations**. Why the other choices are false: - **A**: The long does not necessarily have to take delivery; most futures positions are closed out before delivery. - **B**: The short cannot necessarily deliver on any day; delivery is governed by the contract rules and delivery cycle. - **D**: Delivery does not have to be to the original long. The futures position can be transferred through offsetting trades, and delivery is made to the current long position holder at expiration.
Author: Manit Arora
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Q-148.2 Which of the following is TRUE about a wheat futures contract?
A
The long can stall but must eventually take delivery of wheat
B
The short can deliver futures on any day of the contract delivery month
C
The exchange defines the underlying asset (quality), contract size, delivery months, and delivery arrangements
D
If the contract was entered into between "Investor A" (long wheat) and "Investor B" (short wheat), then eventual physical delivery must be to the original Investor A
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