When the settlement price rises, the mark to market system makes
A) long position profits more than short position losses.
B) long position losses greater than short position profits.
C) long position losses equal to short position profits.
D) long position profits equal to short position losses.

Question

Quizplus · Accepted Answer

In a mark to market system, when the settlement price rises, those holding long positions (buyers) profit because the value of their positions increases, while those holding short positions (sellers) incur losses because the value of their positions decreases. The profits of the long positions are exactly equal to the losses of the short positions, as the total amount of money in the system remains constant; it's simply redistributed between the parties.

When the Settlement Price Rises, the Mark to Market System