When a speculator invests in a financial futures contract, the individual
A) enters a contract to make future delivery
B) enters a contract to accept future delivery
C) either enters a contract to make or to accept future delivery
D) hedges to reduce the risk of loss

Question

When a speculator invests in a financial futures contract, the individual
A) ​enters a contract to make future delivery
B) ​enters a contract to accept future delivery
C) ​either enters a contract to make or to accept future delivery
D) ​hedges to reduce the risk of loss

Quizplus · Accepted Answer

When a speculator invests in a financial futures contract, he or she may either enter a contract to make (sell) or to accept (buy) future delivery. This allows the speculator to profit from the price movements of the underlying asset without actually taking delivery or making delivery of the asset. Speculators do not use futures to hedge against risk; instead, they use it as a tool for pure speculation.

When a Speculator Invests in a Financial Futures Contract, the Individual