You are currently long in a futures contract. You instruct a broker to enter the short side of a futures contract to close your position. This is called ________.
A) a cross-hedge
B) a reversing trade
C) a speculation
D) marking to market

Question

Quizplus · Accepted Answer

Entering the short side of a futures contract to close a long position is called a reversing trade. This involves selling a futures contract to offset a long position in the same futures contract. A cross-hedge refers to using a futures contract to hedge against a different underlying asset. Speculation involves taking on risk in the hopes of making a profit. Marking to market refers to adjusting the margin in a futures contract based on changes in the market value of the underlying asset.

You Are Currently Long in a Futures Contract