You Take a Long Position in a Futures Contract of One

question 64

Multiple Choice

You take a long position in a futures contract of one maturity and a short position in a contract of a different maturity,both on the same commodity.This is called __________.

• A) a cross hedge
• B) a reversing trade
• C) a spread position
• D) a straddle

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Definitions:

Anticipated Profits

Expected financial gains based on projected business activities, market conditions, and strategies, before they are actually realized.

Marginal Benefit

The surplus benefit or joy experienced upon consuming an additional unit of a good or service.

Expected Profit

The anticipated return on an investment or business venture after considering all relevant costs and revenues.

Optimal R&D

The most efficient level of investment in research and development activities that maximizes the benefits from new knowledge and products.