Which of the following would result in a profit of a futures contract when the underlying currency depreciates?
A) Buy a futures contract; sell a futures contract after the currency has depreciated
B) Sell a futures contract; buy a futures contract after the currency has depreciated
C) Buy a futures contract; buy an additional futures contract after the currency has depreciated
D) None of the above would result in a profit when the underlying currency of the futures contract depreciates.

Question

Quizplus · Accepted Answer

Selling a futures contract before the currency depreciates and buying back the contract after the currency has depreciated would result in a profit. This is because the seller of a futures contract is obligated to deliver the underlying currency at the contract's expiration, regardless of the current market price. Therefore, if the currency depreciates, the seller can buy the currency at a lower price and deliver it at the contract's expiration, resulting in a profit.

Which of the Following Would Result in a Profit of a Futures