If you took a long position in a pork bellies futures contract and then forgot about it, what would happen at the expiration of the contract?
A. Nothing—the seller understands that these things happen.
B. You would wake up to find the pork bellies on your front lawn.
C. Your broker would send you a nasty letter.
D. You would be notified that you owe the holder of the short position a certain amount of cash.
E. You would be notified that you have to pay a penalty in addition to the regular cost of the pork bellies.
D. You would be notified that you owe the holder of the short position a certain amount of cash.
The item is usually not delivered, but cash settlement can be made through the use of warehouse receipts. You are still obligated to fulfill the contract and give the holder of the short position the value of the pork bellies.
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