Question

Determine whether each of the following statements is TRUE or FALSE, and write a short explanation for your answer

1. One way to offset a long position in a December futures contract on corn is to reverse it by taking a short position on a November or December futures contract on the same commodity.
2. The margin requirement in a forwards contract ensures that each party places a certain amount of money to cover potential losses on their position.
3. In a futures contract, the outcome of the short position is always opposite to but twice as much as the outcome of the long position (i.e., if the long position makes $x in profits, the short position makes $2x in losses).
4. When a limit order is placed it is immediately fulfilled in the futures market exchange.

Answer 1

As per the Chegg rules, we are allowed to solve at max one question, if more than one are asked, or else we will bw revoked

Question 1

The above statement is true, as to offset a long position on a future contract, we need to buy a short one for December, so that the returns gets neutralized. Hence the answer will be true.