Investor A has signed a short oil futures contract for delivery in one year. Inv

Question

Investor A has signed a short oil futures contract for delivery in one year. Investor B has signed a long oil futures contract for delivery in one year. Which of the following statements is true? More than one answer is possible.

If the oil price for delivery in 1 year goes up the short side makes money.

If the oil price for delivery in 1 year goes up the short side loses money.

If the oil price for delivery in 1 year goes up the long side makes money.

If the oil price for delivery in 1 year goes up the long side loses money.

If the oil price for delivery in 1 year goes up the short side makes money.

If the oil price for delivery in 1 year goes up the short side loses money.

If the oil price for delivery in 1 year goes up the long side makes money.

If the oil price for delivery in 1 year goes up the long side loses money.

Explanation / Answer

correct option is "B(If the oil price for delivery in 1 year goes up the short side loses money.) and C- " (If the oil price for delivery in 1 year goes up the long side makes money.)

short future means you have a sold a contract whereas long future contract means you have buy a contract.

so if the price goes up ,the long contract will make profit as the same stock will be available in market at higher price while you are buying at future price (which will be comparatively lower than market price)

The short contract will make a loss since you will sell at future price which is lower than market price .

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