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5
I hate Hedges.
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The question just asks which one of the four is true. Answer: “the buyer of a forward contract gains when prices increase. And the seller of a forward contract loses when prices increase”
So I get one wins and one loses of course. The part I don’t get is that the buyer of a forward contract GAINS when prices increase.
Doesn’t a forward contract work like this.
- Going to sell equipment for 1000
- Price might go down so enter into forward contract to lock in the 1000.
- Price does go down to 900. Lose 100 on the equipment but, the contract gained 100.
So you gained because the price went down, not up.
So how is the answer above correct by saying the opposite?
Help lol 😂 I hate this.
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- 4 years ago
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