Question

You sell (short) a future at 3700 points and at expiry, the index is 3300. Therefore, the index has fallen by how many points? 1) 300 2) 400 3) 500 4) 600

Answer 1

Sell (short) a future at 3700 points and at expiry, the index is 3300. Therefore, the index has fallen by 400 points. so the correct option is 2) 400.

Step-by-step explanation:

Short Future Sale: The user sold (shorted) a future at 3700 points. In financial markets, selling short involves selling an asset that the seller does not own, with the intention of buying it back later at a lower price. In this case, a future contract was sold at 3700 points.

Expiry Index Value: At the expiry, the index is at 3300 points. The index value at expiry determines the profit or loss in a short future position. In this scenario, the index is at 3300 points when the contract expires.

Calculation: To determine the change in points, subtract the index value at expiry from the initial selling point: 3700 - 3300 = 400.

Fallen Points: Therefore, the index has fallen by 400 points.