Question

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?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

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.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You take a long position in one gold futures contract. The contract size is 100 ounces....
You take a long position in one gold futures contract. The contract size is 100 ounces. The initial margin requirement is $5,000. The current futures price is $1,200/ounce. At the end of the 1st day of trading, the futures price is $1,190/ounce. At the end of the 2nd day of trading, the futures price is $1,192/ounce. What is the trader's daily gain or loss on day 1? Group of answer choices
If you hold a long position in 30-year U.S. Treasury bond futures, when interest rate decreases,...
If you hold a long position in 30-year U.S. Treasury bond futures, when interest rate decreases, you lose money. True or false?
Suppose that in September you take a short position in a contract on crude oil futures...
Suppose that in September you take a short position in a contract on crude oil futures that expires the next May. You close out your position in March. The futures price is $50.50 per barrel when you enter into your contract, $49.30 when you close out your position, and $48.50 at the end of December. One contract is for the delivery of 1,000 barrels. (1 point) What is your total profit? (3 points) How are you taxed if you are:...
A trader enters into a short position in ten Eurodollar futures contract (sell 10 contracts). How...
A trader enters into a short position in ten Eurodollar futures contract (sell 10 contracts). How much does the trader gain (or lose) when the futures price quote increases by 15 basis points?
If you are in the buy position of a futures contract, Group of answer choices you...
If you are in the buy position of a futures contract, Group of answer choices you gain when the underlying asset price goes up you gain when the underlying asset price goes down you always gain you lose when the underlying asset price goes up you neither lose or gain
Smith holds a long position for a Stock index futures contract which is four months from...
Smith holds a long position for a Stock index futures contract which is four months from maturity. A stock index currently stands at 350. The risk-free interest rate is 8% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum. a) What should the futures price for a four-month contract be? b) Suppose one month later the stock price is 351. The dividend yield and index are the same. What is the value of...
What is the major difference in the obligation of one with a long position in a...
What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract? Do they have any risk for the investors?
There are two parties to a futures contract. One party in this contract who has a...
There are two parties to a futures contract. One party in this contract who has a long position in the contract, is doing which of the following: Group of answer choices This person gives a commitment to sell a certain commodity at a certain price at a future date. This person has an option to buy a certain commodity at a certain price in future This person has a very long time horizon and plans to hold the contract open...
1. Select the correct answer: A Long position in a Cattle Futures Contract: Gives the buyer...
1. Select the correct answer: A Long position in a Cattle Futures Contract: Gives the buyer the right to acquire cattle at a fixed price over a period of time in the future. Gives the buyer the right to sell cattle at a fixed price over a period of time in the future. Requires that the buyer acquire cattle at a fixed price at a period of time in the future. Requires that the buyer sell cattle at a fixed...
Explain why an investor might take an illiquid position in a forward contract rather than using...
Explain why an investor might take an illiquid position in a forward contract rather than using an exchange-traded futures contract. (2 pts.)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT