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A market participant believes that the price of oil will fall and consequently borrows oil commodities...

A market participant believes that the price of oil will fall and consequently borrows oil commodities from a dealer and sells the commodities. After the price eventually does fall, the participant buys oil commodities on the open market and returns them to the broker who made the original loan. Which of the following describes this situation?

A. A speculator taking a long position

B. A hedger taking a long position

C. A speculator taking a short position

D. A hedger taking a short position

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Answer #1

Correct answer is option C. A speculator taking a short position.

This is example of speculator who has predicted price decline and borrow oil from the dealer and sold it. After the price decline speculator bought it at lower price and returned the same to the dealer making profit out of speculation.

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