You are a trader reading the news over the weekend. You read that the attacks in the Middle East are getting worse and are worried about supply being disrupted and reduced, particularly for commodities. Which is most likely for me to do when the market opens?

Question

BlackTom AI · Accepted Answer

When news suggests worsening Middle East attacks and potential supply disruption for commodities, a trader anticipates higher prices at the market open.

Option: Use a trading platform to buy a future on oil on the exchange. This choice reflects a proactive move to gain from an expected price rise by taking a long position in oil futures, which are standard instruments for hedging or speculating on near-term supply shocks.

Why this aligns with the scenario: Futures on oil are traded on exchanges and are a common vehicle for traders to express a view that prices will increase due to potential supply constraints. Entering a long futures position provides exposure to rising prices and can be executed quickly via a trading platform, which is exactly what a trader would consider in response to such news.

Why other possibilities (if any) might be less likely: If there were other options, you would assess them by whether they page into the same risk/reward profile. For instance, attempting to sell futures would imply expecting a price drop, which contradicts the concern about supply disruption. Holding cash or avoiding action would miss the opportunity to hedge or profit from the anticipated move. However, since only the one option is presented, the justification focuses on why buying oil futures is the most plausible immediate action given the described risk signal.

fin_412_120258_251367 Test 1 in class

You are a trader reading the news over the weekend. You read that the attacks in the Middle East are getting worse and are worried about supply being disrupted and reduced, particularly for commodities. Which is most likely for me to do when the market opens?

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