Question

Which of the following statements is FALSE?

		When a hedger holds her futures position until the maturity day, the hedge works thanks to the convergence property
		If you close out your futures position prior to the contract maturity day, the hedge is not guaranteed to work
		If you close out your futures position prior to the contract maturity day, your futures account will not be marked to market

Answer 1

Even if you are closing out the future position prior to the contract maturity date then also the future account will be marked to market because they will be marked with the the existing price of the shares. Statement (c) is false.

So other two statements are true because convergence theory advocates that the hedgers should Be holding their position till the maturity date, because the spot prices are almost equal to the future prices.

So, correct answer will be option (C)if you close out your future position prior to the contract maturity day, your future account will not be marked to market.