The price of a September crude oil futures contract is $20 per barrel,while that of a September gasoline futures contract is $25 per barrel.You expect that in a month,the price difference will increase to $10 per barrel.A profit generating trading strategy is to:

Question

Quizplus · Accepted Answer

Shorting (selling) September crude oil futures and buying (going long) September gasoline futures will result in a profit if the expected price difference of $10 per barrel is realized. This is because the price of crude oil is expected to decrease relative to gasoline, while the price of gasoline is expected to increase relative to crude oil. Therefore, selling crude oil futures at $20 per barrel and buying gasoline futures at $25 per barrel allows for a $5 per barrel profit if the difference increases to $10 per barrel.

The Price of a September Crude Oil Futures Contract Is