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Commodity Spreads: Quiz time

9 May 2018,

We have already completed 13 parts in our spread series, that had been filled with information on how to trade commodity spreads. I tried to explain everything that every spread trader must know. But before we move on to analyses of different markets, you should test yourself and find out to what extent you understand commodity spreads. Each question relates to one lesson from our series. If something is not clear to you, you can help yourself by clicking on the question number and the article, where the topic has been discussed. At the end of the quiz you will find the right answers. Good luck!

 

Start…

1. When supply exceeds demand:

a) there is an upward push on the commodity price

b) there is a downward push on commodity price

c) the price of the commodity moves to the side

2. Expiration of a futures contract means:

(a) the date on which the contract will cease to be traded on the stock exchange

(b) the date on which the contract starts to be traded on the stock exchange

c) the date when it is necessary to get rid of the contract

3. Interdelivery spread represents:

a) the price difference between two futures contracts for different commodities

b) the price difference between two futures contracts for the same commodity but with different expiration

c) the price difference between two futures contracts for a similar commodity traded on different exchanges

4.The term structure curve shows

(a) prices of currently traded futures

(b) prices of already expired futures

(c) the most liquid futures prices

5. Term structure in the following chart shows the market in:

a) contango

b) backwardation

 

 

6. What does the designation ZCN19-ZCZ18 mean:

(a)  buying the July contract and selling the December corn contract

(c) buying the July contract and selling the December corn contract

b) buying the December contract and selling the July corn contract

7. When we expect the wheat price to fall in the near future, we will choose the following strategy:

a) we open two long positions for contracts with different expiration

b) open a long position for a contract with a closer expiration and a short position for a contract with a more distant expiration

c) open a short position for a contract with closer expiration and a long position for a contract with a more distant expiration

8. On the sugar term structure, find out the spread change between the 4th and 5th expiration month in the period of March 1, 2017 and April 26, 2017:

a) 0.45

b) 0.46

c) 0.47

9. Spot price indicates

(a) the price of the commodity on the delivery day

(b) the commodity price on the expiry date

(c) commodity price with immediate delivery on the physical market

10. The strategy from question 7 is called

a) bull spread

(b) bear spread

c) intermarket spread

11. From the sugar contango histogram, find out how many percent of the time the market has been in backwardation for the last three years (until May 7, 2018) between the second and third expiration months:

a) 78.8%

b) 21.2%

c) 13.2%

12. Choose the correct answer:

a) bull spread is more favorable if the market is in contango

b) bear spread is more favorable if the market is in contango

c) bear spread is more favorable if the market is backwardation

13.From the following options, select the bear spread on the corn that belongs to a single harvest:

(a) ZCH19-ZCZ18

(b) ZCZ18-ZCH19

(c) ZCZ18-ZCH18

 

Correct answers:

1b) 2a) 3b) 4a) 5b) 6a) 7c) 8c) 9c) 10b) 11b) 12b) 13a)

 

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