Tyler Buys a Futures Contract from Alex That Gives Him

question 146

Multiple Choice

Tyler buys a futures contract from Alex that gives him the right to buy 1,000 barrels of oil at $125 per barrel in 48 months. What happens in 48 months if the actual price per barrel of oil is $100?

• A) Tyler made a profit of $25 per barrel, or $25,000.
• B) Alex must give Tyler $10,000.
• C) Tyler must pay Alex $25,000.
• D) The contract becomes void because the price turned out lower than expected.