From the perspective of determining profit and loss, the long futures position most closely resembles a levered investment in a ________.
A) long call
B) short call
C) short stock position
D) long stock position

Question

Quizplus · Accepted Answer

A long futures position and a long stock position both involve purchasing an asset with the expectation that its value will increase, resulting in a profit. Both positions also involve the possibility of unlimited profit and limited loss. Therefore, the long futures position most closely resembles a levered investment in a long stock position. The other options - a long call, short call, and short stock position - involve different risk-reward profiles and do not closely resemble a long futures position in terms of determining profit and loss.

From the Perspective of Determining Profit and Loss, the Long