Question

You initiated a short futures position at a price of 100 before leaving for school. Now you must be at school so you cannot monitor the progress of your position; what order could you place with your broker before going to school to unwind your position if prices moved 10 points in your favor?

a. Buy limit 90

b. Buy stop 90

c. Buy stop 110

d. Buy limit 110

e. Short stop 90

Answer 1

a. Buy limit 90

You have taken short position in future which means you have short sale the future thus if prices go down then only you will get profit.

You have short future at price of $100 and want to buy it when prices moved down $10 in your favor.

Then place a Buy-limit order at price of $90. This order execute only if future prices hit at $90.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.