Which one of the following statements is correct if a speculator short sells a commodity or financial futures contract?
A) The speculator expects to profit from a decline in the price of the contract.
B) The speculator stands to make an unlimited amount of profit since there is no limit to how high the price of the underlying commodity or financial instrument can rise.
C) The speculator is hoping to gain some of the benefit derived from the volatile price while limiting his/her exposure to loss.
D) The speculator may be hedging if the underlying commodity is not in the speculator's possession.

Question

Quizplus · Accepted Answer

When a speculator short sells a commodity or financial futures contract, they are betting that the price of the contract will decline. If the price does decline, they can buy back the contract at a lower price, thus making a profit on the difference.

Which One of the Following Statements Is Correct If a Speculator