In General, When Deciding Whether a Market Participant Needs to Buy

question 30

Multiple Choice

In general, when deciding whether a market participant needs to buy or sell futures contracts in order to hedge, the rule could be:

• A)Buy futures if you have the underlying asset and sell futures if you need the underlying asset
• B)Sell futures if you have the underlying asset and buy futures if you need the underlying asset
• C)Buy futures if you want to speculate, sell futures if you want to hedge
• D)Buy futures if you are willing to have unlimited risk, sell futures if you want capped risk

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Definitions:

Skills

Acquired abilities or expertise in specific activities, often developed through practice and education.

Abilities

The physical and mental capacities that enable an individual to perform tasks or engage in activities.

Ethical Dilemma

A situation in which a person must choose between two or more actions that have ethical implications, making it difficult to decide what is right.

Informed Decision

A decision made based on a comprehensive understanding of the relevant information, implications, and consequences.