Asked by Andres Velazquez on Jul 21, 2024
Verified
Which of the following is a speculation strategy?
A) An airline going long oil futures.
B) A cereal company purchasing corn in the spot market.
C) An auto manufacturer longing steal futures.
D) A hedge fund shorting index futures.
Speculation Strategy
An investment strategy aimed at making profits from market value changes, often involving high risk and short-term commitments.
Long Oil Futures
An investment strategy involving the purchase of oil futures contracts in anticipation of oil prices increasing in the future.
Shorting Index Futures
A strategy involving the sale of index futures contracts to profit from an anticipated decline in the value of the underlying index.
- Comprehend the techniques to capitalize on market forecasts and fluctuations in prices using futures.
Verified Answer
AM
abdellah mabaoutJul 25, 2024
Final Answer :
D
Explanation :
Speculation involves taking a position in the market with the expectation of profiting from fluctuations in the price of assets. A hedge fund shorting index futures is engaging in speculation, as it is betting on the decline of market indices to make a profit, without necessarily having a direct stake in the underlying assets for business operations.
Learning Objectives
- Comprehend the techniques to capitalize on market forecasts and fluctuations in prices using futures.