Implications of Entering a Futures Contract

Easy Derivative Strategies Futures And Forwards

A trader is operating in a market characterized by high volatility. They anticipate that the price of oil will rise in the coming months. To capitalize on this expectation, the trader decides to enter a futures contract to buy oil.

Given this context, which statement best describes the implications of entering into this futures contract?

The trader has agreed to buy oil at today's price regardless of the future market price.

The trader will not have to pay the futures price until the delivery date.

The trader faces an unlimited loss potential if the price of oil increases significantly.

Hint

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