Question

Consider the following statements regarding futures contracts that may be settled by delivery: (1) "The long initiates the delivery process" (2) "The short can choose when and how to settle the futures contracts"

Both are correct

Both are wrong

(1) is correct and (2) is wrong

(1) is wrong and (2) is correct

Answer 1

Future contracts are standardized contracts where one party agrees to buy or sell a certain stock in the future date at a predetermined price. Future contracts require daily settlement and a clearing house acts a agent between the two parties. The buyer is the long and the seller is the short. The exchange acts like a facilitator.

So, both the statements are incorrect.

So, the correct option is option 2.