Chartered Market Technician (CMT) Practice Exam 2025 - Free CMT Practice Questions and Study Guide

The primary advantage of futures contracts being fungible is that it increases liquidity in the market. Fungibility means that futures contracts are standardized and interchangeable, meaning that one contract is viewed as equivalent to another. This characteristic allows market participants to easily enter or exit positions without concerns about the specifics of the contract they are trading.

As a result, higher liquidity is achieved because more participants can transact without delays or significant price discrepancies. The ability to buy and sell contracts quickly at prevailing market prices attracts even more traders to the market, further enhancing liquidity. In actively traded futures markets, this liquidity is crucial as it provides traders with the ability to manage their risk and execute strategies efficiently. Overall, the interchangeability of contracts fosters a more dynamic trading environment, benefiting all market participants.