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Investors who take a long position in a futures contract in contango tend to lose money....

Investors who take a long position in a futures contract in contango tend to lose money.

True or False?

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Answer #1

When the market is in contango, it means that the expected price of the underlying is greater than the spot price. So it is advisable to get into a futures contract becuse the price of underlying is going to rise. So if the investor has a long position in a futures on the underlying, he has fixed the price to buy the underlying at. When the market price is higher, it is profitable to buy low and sell high. So the statement is false because the investor tends to gain money.

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