If a trader sells a futures contract, what is their market position and obligation?

If a trader sells a futures contract, what is their market position and obligation?

• A. Short, Make Delivery
• B. Long, Take Delivery
• C. Short, Take Delivery
• D. Long, Make Delivery

Answer: (A)

Selling a futures contract creates a short position, and the obligation attached to that short is to deliver the underlying asset at the contract’s expiration to the buyer. If the contract is cash-settled, the obligation is to settle in cash instead of delivering the physical asset. In practice, many traders offset their position before expiration by entering an opposite trade, so no actual delivery occurs; the outcome is determined by daily price changes. The long side, by contrast, would be the one taking delivery unless they offset.

Selling a futures contract creates a short position, and the obligation attached to that short is to deliver the underlying asset at the contract’s expiration to the buyer. If the contract is cash-settled, the obligation is to settle in cash instead of delivering the physical asset. In practice, many traders offset their position before expiration by entering an opposite trade, so no actual delivery occurs; the outcome is determined by daily price changes. The long side, by contrast, would be the one taking delivery unless they offset.