New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    A long contract requires that the

    investor
    A Sell securities in the future Correct Answer Incorrect Answer
    B Buy securities in the future Correct Answer Incorrect Answer
    C Hedge in the future Correct Answer Incorrect Answer
    D Close out his position in the future Correct Answer Incorrect Answer

    Solution

    In stock trading, being long a stock means an action to buy a stock while being short a stock means borrowing and selling a stock which you don't own. In futures trading, the Long refers to the PERSON in a futures transaction that is committed to buying the underlying asset from the person known as the Short. So long and short in futures trading refers to the parties rather than a transaction type or order type.  For example, A who thinks price will decrease is entering into obligation to sell shares; we say A is going SHORT in future. While B who thinks price will Increase is entering into obligation to buy shares, we say B is going LONG in future.

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