Which of the Following Is True About Profits from Futures

question 25

Multiple Choice

Which of the following is true about profits from futures contracts?

• A) The person with the long position gets to decide whether to exercise the futures contract and will only do so if there is a profit to be made.
• B) It is possible for both the holder of the long position and the holder of the short position to earn a profit.
• C) The clearinghouse makes most of the profit.
• D) The amount that the holder of the long position gains must equal the amount that the holder of the short position loses.
• E) Holders of short positions can recognize profits by making delivery early.

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Definitions:

Net Cash

Describes the amount of cash available after accounting for all cash inflows and outflows.

Statement Of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Financial Ratios

Financial ratios are quantifiable measures used to evaluate a company's financial performance by comparing two line items from financial statements.

Industry

A category of businesses that produce or sell similar products, services, or are involved in the same level of economic activity.