CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

Assume that you are comparing two futures contracts in which the underlying good is crude oil. Which of the following would be identical for both contracts?

I. The amount of crude oil
II. The quality or grade of crude oil
III. The mechanism for delivery of crude oil
Correct Answer: I, II and III

Since futures contracts are standardized, all of the above would be standardized. The two contracts could, however, differ as to delivery date (expiration, settlement) and futures price.

User Contributed Comments 11

User Comment
Oneil quality or grade is standardized?
Bibhu Quality or grade is standardized.
tanyak even though it's standardized, couldn't the amounts still be different? i.e 1000 barrels or 2000 barrels? the questions asks what is identitical? also, couldn't there be a contract with regular or premium oil or something? in that case they woudln't be identical? so, really, the mechanism for delivery would be the only thing that is identical as it is a futures contract. Does anyone have any other thoughts?
boydag everything is standard on a futures contract. grade is standard. also the amount is standard. you get 1 barrel per futures contract. If you want 2 barrels then you need to buy 2 futures contracts. (figuratively speaking ofcourse)
magicchip futures = everything standardized.
forward = design your own contract
peteypete if someone is trading oil in futures or forwards they need to know the amount, the type of crude, and how they will get it...just because forwards aren't standardized doesn't mean the people using them are complete morons and don't write up contracts with specifics about the trade...
IvanTG I - is assuming the standard 1000 barrels contract

I disagree with II...there are several types of futures for oil..(light sweet, brent, etc)...
johntan1979 And for each of that, don't you need to standardize each one?
To-be-CFA Everything is standardized in the Futures. Period.
dvallejo Since the future contracts are standardized and identical. is stupid to have a question that say that you can compare to identical futures.
what about if you have a future of 1000 barrels and other of 2000 barrels?
ascruggs92 Some of you don't seem to get what standardized means here. First off, a 2000 barrel contract is the same as two 1000 barrel contracts, so that point is moot. However, if the standard was 2000 barrels, you could not buy 1000 barrels because you can't purchase half a contract.

Second, IvanTG, the question could have made it more specific, true, but future contracts, being standardized, will have the type of oil you are purchasing specified, and all others with the same type of oil (i.e. WTI or Brent) will have the same standardized amount and price.
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