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Basic Question 4 of 13
The insurance perspective suggests all ______ in commodity futures have a positive expected excess return.
B. producer hedges
C. short positions
A. long positions
B. producer hedges
C. short positions
User Contributed Comments 3
| User | Comment |
|---|---|
| jier926 | shouldn't the one who short future act like selling a protection and thus require a premium? |
| mezoltan | commodity producers naturally have the long position (without any financial instrument) on the commodity. If they want to hedge, they have to short the commodity and pay the premium (for the opportunity to short it) to the other side of the transaction. |
| leeboy | In backwardisation the future is below thr spot. As time goes by the future price will rise to thr spot as it nears maturity, thus resulting in a gain for a long position in the future. |
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Learning Outcome Statements
compare theories of commodity futures returns;
describe, calculate, and interpret the components of total return for a fully collateralized commodity futures contract;
contrast roll return in markets in contango and markets in backwardation;
CFA® 2025 Level II Curriculum, Volume 5, Module 33.