Question

In a futures contract, if the spot price at maturity is lower than the agreed futures price, the party with a 'Short Position' will:

Q: Answer-In a futures contract, if the spot price at maturity is lower than the agreed futures price, the par...

Short Position Seller Has the obligation to sell the asset at the futures price. At maturity, the futures price converges with the spot price. If Spot Price Futures Price , the short position holder can buy the asset cheaply in the spot market at the lower spot price and sell it at the higher agreed futures price to fulfill the contract. Profit for Short Position Futures Price - Spot Price a positive number in this scenario. Example Futures price 100, Spot at expiry 90. The short seller buys at 90 and sells at 100, making a 10 profit before transaction costs.