FRM Part I · FRM Exam Part I · Exchanges and OTC Markets
On a futures exchange, a trader who buys a contract and later sells an identical contract for the same delivery month is best described as having done which of the following?
The trader has closed out the position. Selling an identical contract offsets the earlier purchase, and the clearing house nets them to zero, so no obligation or delivery remains. Rolling would need a trade in a different delivery month.
- AClosed out the position, so no further obligation remains to the clearing houseCorrect
- BRolled the position into a later delivery month
- CTaken delivery of the underlying asset
- DConverted the futures position into an OTC forward
Explanation
Selling an identical contract offsets the earlier long position. The clearing house nets the two positions, leaving no obligation. Rolling would require a trade in a different delivery month, and delivery arises only if the position is held to maturity.
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