Which of the following statements is (are) true about futures contracts?
I. The buyer of the contract must take delivery of the underlying commodity.
II. To reverse a position, the buyer of a contract must sell an identical contract which is recognized as offsetting the other one.
A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements I and II are correct.
D) Neither statement I nor II is correct.

Question

Which of the following statements is (are) true about futures contracts?
 I. The buyer of the contract must take delivery of the underlying commodity.
II. To reverse a position, the buyer of a contract must sell an identical contract which is recognized as offsetting the other one.
A) Only statement I is correct.
B) Only statement II is correct.
C) Both statements I and II are correct.
D) Neither statement I nor II is correct.

Quizplus · Accepted Answer

II is correct because in futures trading, positions can indeed be reversed or closed by entering into an offsetting transaction, which involves selling an identical contract for the buyer or buying an identical contract for the seller. Statement I is incorrect because the buyer of a futures contract does not necessarily have to take delivery of the underlying commodity; they can close out their position before the contract's delivery date.

Which of the Following Statements Is (Are) True About Futures