If the futures price of a commodity rises,
1) the long position sustains a loss
2) the long position experiences a profit
3) the short position sustains a loss
4) the short position experiences a profit
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

​If the futures price of a commodity rises,
1) the long position sustains a loss
2) the long position experiences a profit
3) the short position sustains a loss
4) the short position experiences a profit
A)1 and 3
B)​1 and 4
C)​2 and 3
D)​2 and 4

Quizplus · Accepted Answer

When the futures price of a commodity rises, the long position (the party that agrees to buy the commodity in the future) experiences a profit because they can buy the commodity at a lower price than the market price. Conversely, the short position (the party that agrees to sell the commodity in the future) sustains a loss because they have to sell the commodity at a lower price than the market price.

​If the Futures Price of a Commodity Rises

If the Futures Price of a Commodity Rises