What Happens to the Price of a Futures Contract as Expiration

question 70

Multiple Choice

What happens to the price of a futures contract as expiration draws closer?

• A) The futures price exceeds the spot price of the asset.
• B) The futures price is exceeded by the spot price of the asset.
• C) The futures price approaches the spot price of the asset.
• D) There is no relationship between the futures price and spot price as the contract approaches expiration.

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Definitions:

Pressure

The force exerted per unit area by gases, liquids, or solids on the walls of their container or on objects in contact with them.

Confining Pressure

The pressure applied equally in all directions at any given point within the earth’s crust, often affecting rock properties.

Compression

is the application of force that presses matter together, reducing its volume or causing deformation.

Tension

A force that pulls materials apart, causing stress or strain in geological contexts, such as the stretching of the Earth's crust.