There are several types of Risk discussed on the Series 3 Exam and Futures License Tests
Transfer Risk
Liquidity Risk
Reduction Risk
Transfer Risk is the possibility of a loss when the position may require a transfer of securities or futures. Example would be Writing Calls or other contract where an obligation lies to another contract holder on the Buy Side.
Liquidity Risk is the Risk of how quickly a position can be turned into Cash - or how slowly. Liquidity is the Cash position the trader is in.
Risk Reduction can be achieved by reducing exposure through hedging a position against a loss or placing a stop order or other floor protection order.
NFA FUTURES LICENSE STUDY MATERIAL
Course material for all FINRA, NASAA and NFA Brokers and Principals.
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