At maturity of a futures 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 requires that the futures price and spot price are equal at maturity. This means that the futures price must converge to the spot price, eliminating any potential for arbitrage. Marking to market helps ensure this convergence by adjusting the futures price and margin accounts daily based on changes in the underlying asset's value. Open interest refers to the number of outstanding contracts, while triple witching hour refers to a phenomenon when stock options, index options, and futures contracts expire on the same day.

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