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 at a higher price than its purchase price would result in a profit when the underlying currency depreciates. By selling a futures contract before the currency depreciates and buying it back after the depreciation, the investor would have made a profit due to the price difference. Option A would result in a loss as selling a futures contract after the currency has depreciated would fetch a lower price than what was purchased at. Option C would not result in any profit as buying an additional futures contract after the currency has depreciated would not have any impact on the original position. Option D is incorrect as option B would result in a profit.

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