Question

(TCO IF) You have agreed to deliver the underlying commodity on a futures contract in 90 days. Today, the underlying commodity price rises and you get a margin call. You must have Group of answer choices a long position in a futures contract. a short position in a futures contract. sold a forward contract. purchased a forward contract. purchased a call option on a futures contract.

Answer 1

The answer is You must have a long position in a futures contract.

Step-by-step explanation:

A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price. They are also often used to hedge the price movement of the underlying asset to help prevent losses from unfavorable price change.

Forward contracts are traded over-the-counter and have customizable terms that are arrived at between the counterparties. It is similar to futures contract in the sense that lock in a future price in the present.

However, in this case, Futures contracts apply because it is standardized thereby making each participant have the same terms regardless of who is the counterparty.