Question

What is right about taking a long or short position in future contract?

	A.	If we expect that the asset’s future spot price will decrease, we should take a long position on the asset.
	B.	An increase on asset’s price is favorable to traders who take a short position on the asset.
	C.	If we expect that the asset’s future spot price will increase, we should take a short position on the asset.
	D.	All above are wrong

Answer 1

D.	All above are wrong

A long position means that we will be buying the futures contract. When we buy a futures contract, we make profit when the spot price goes up. Therefore, if we expect that the asset’s future spot price will increase, we should take a LONG position on the asset.

A short position means that we will be selling the futures contract. When we sell a futures contract, we make profit when the spot price goes down. Therefore, if we expect that the asset’s future spot price will decrease, we should take a SHORT position on the asset.

An increase on asset’s price is favorable to traders who take a LONG position on the asset