Which of the following trading strategies are correct?
I. If you expect the British pound to appreciate in value, you should short the pound.
II. If you expect interest rates to rise, you should go long on interest rate futures.
III. If you expect the stock market to rise, you should go long on stock-index futures.
IV. If you expect the stocks in your portfolio to temporarily decline in value, you should short stock-index futures.
A) I and II only
B) II and IV only
C) III and IV only
D) I and III only

Question

Quizplus · Accepted Answer

III and IV are correct because if you expect the stock market to rise, going long on stock-index futures is a strategy to profit from that rise. If you expect a temporary decline in the value of your stocks, shorting stock-index futures can hedge against that decline.

Which of the Following Trading Strategies Are Correct