If a Portfolio Manager Believes Stock Prices Will Fall and Knows

question 47

Multiple Choice

If a portfolio manager believes stock prices will fall and knows that a block of funds will be received in the future,then he should

• A) sell stock index futures short.
• B) buy stock index futures long.
• C) stay out of the futures market.
• D) borrow and buy securities now.

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Definitions:

Margin Deposit

The initial amount of money placed in a margin account, used as collateral for borrowing money to buy securities on margin.

Single Stock Futures

Futures contracts where the underlying asset is an individual stock, allowing speculation or hedging on the future price of the stock.

Stock Index Futures

Futures contracts based on stock market indices, used by investors to speculate on or hedge against future movements in the market index.

OneChicago

A financial entity offering a marketplace for trading futures on individual stocks, ETFs, and indexes.