In a commodity futures contract, if the price falls, who typically profits?

• A. The buyer
• B. The seller
• C. Both parties equally
• D. Neither party

Answer: (B)

In futures trading, profit comes from how price movement affects your position, whether you’re long (buyer) or short (seller). If you’re the seller, a fall in price means you can close the contract at a lower market price than the price you agreed to sell for, locking in a gain. For example, you commit to selling at 100. If the market price drops to 90, you can offset your position at 90, gaining 10 per unit. The buyer, who is long, would face a loss as the price falls. So, when prices fall, the seller typically profits.