An investor who wants a long position in a ____ must first place the order with a broker,who then passes it on to the trading pit or electronic network.Details of the order are then passed on to the exchange clearinghouse.
A) Call option
B) Put option
C) Forward contract
D) Futures contract
E) None of the above

Question

Quizplus · Accepted Answer

A long position in futures contracts involves purchasing futures contracts in anticipation of prices increasing in the future. This requires placing an order with a broker who passes it on to the trading pit or electronic network. Details of the order are then passed on to the exchange clearinghouse for execution. Options (A and B) involve the right to buy or sell an underlying asset at a certain price, while a forward contract (C) is a customized agreement between two parties without the involvement of a clearinghouse. Therefore, the best choice is D) Futures contract.

An Investor Who Wants a Long Position in a ____