A speculator who buys a futures contract is betting that prices will _____ by the expiration of the contract.
A) decrease
B) increase
C) remain constant
D) guarantee high profits

Question

Quizplus · Accepted Answer

A speculator who buys a futures contract is making a bet that the price of the underlying asset will increase by the expiration of the contract. This is because the buyer of the futures contract is obligated to purchase the asset at a pre-determined price, known as the futures price, regardless of whether the market price at expiration is higher or lower. Therefore, the buyer would only benefit from the purchase if the market price of the asset increases.

A Speculator Who Buys a Futures Contract Is Betting That