Implications of Futures Contracts

Very Easy Derivative Strategies Futures And Forwards

John is an investor who believes that the price of crude oil will rise over the next six months. To benefit from this expected price increase, he decides to enter into a futures contract to buy crude oil at a predetermined price. If crude oil prices do indeed rise, which of the following is TRUE regarding John's position?

John will incur a loss on his futures position.

John will benefit if crude oil prices increase.

John's profit is guaranteed regardless of market conditions.

Hint

Submitted3.3K

Correct2.8K

% Correct83%