A long futures contract represents a commitment to buy an underlying asset at a set price on a future date.
Closing Out the Position
If the holder sells the contract before expiry, they are said to close out the position, effectively negating their obligation to take delivery of the underlying asset.
Why the Answer is B
Selling ahead of expiry removes the obligation, hence closing the position.
Why Other Options are Incorrect
A. Exercised: Applies to options, not futures.
C. Taken delivery: Happens only if the contract is held to maturity.
D. Delivered: Applies to the short position, not the long holder.
ICWIM Study Guide, Chapter on Derivatives: Explains closing out futures contracts.
Futures Market Principles: Discusses position management in futures trading.
References
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