At maturity of a future contract,the spot price and futures price must be approximately the same because of __________.
A) marking to market
B) the convergence property
C) the open interest
D) the triple witching hour

Question

Quizplus · Accepted Answer

The convergence property states that as the maturity date of a futures contract approaches, the futures price and spot price should converge or become closer to each other. This is because traders will adjust their positions in the futures market closer to the underlying asset, which is the spot market, to avoid delivery or settlement issues. Marking to market and open interest are important concepts in futures trading but do not directly affect the convergence of the spot and futures price. The triple witching hour is a term used to describe the expiration of futures, options, and stock index futures at the same time, which may cause increased volatility in the market but does not affect the convergence of spot and futures prices.

At Maturity of a Future Contract,the Spot Price and Futures