Question

Mr. Smith believes that there is going to be rise in the equities market. Based on this information, what would allow Mr. Smith to best take advantage of this situation?

Answer 1

Answer:

The answer is 'Buy a Stock Index Future'

Explanation:

To take best advantage of this situation, Mr Smith should go long(buy) on this stock.

Stock Index Future js a method of derivates. Futures, like forward contract is a forward commitment which obligates the buyer to purchase an asset or the seller to sell an asset and have a predetermined future date and price. Future is used to hedge against worse future situations.