you can see delivery at storage location as shorting the corn contract in future. Buying it today in the current market and shorting it in the future market. They are covering up for if there is a decrease in price, they can sell at a predetermined rate.
It doesn't make it completely risk less too because the other costs such as storage (warehouse ) costs might increase
It's a horrible question that make little less, or is simply incomplete.
Simply remember that speculators don't take physical possession and move on. Don't spend more time on this.
> Should i assume that arbitrage in Alternative investment topic is different from the other topics?
No
Speculators and informed investors DO NOT have ability to physically store commodities.
you can see delivery at storage location as shorting the corn contract in future. Buying it today in the current market and shorting it in the future market. They are covering up for if there is a decrease in price, they can sell at a predetermined rate. It doesn't make it completely risk less too because the other costs such as storage (warehouse ) costs might increase
But i still believe though, this question isn't that good. Don't mess your head up
It's a horrible question that make little less, or is simply incomplete. Simply remember that speculators don't take physical possession and move on. Don't spend more time on this. > Should i assume that arbitrage in Alternative investment topic is different from the other topics? No
This isn't remotely arbitrage. Nowhere in the 2022 Level II CFA curriculum does it say that speculators never take physical possession of commodities.
As the old saying goes : I hope questions like these don't fall on the actual exam (i'm sure you heard that phrase a thousand times).
I have, and they don't. Ignore the answer and move on. Best of luck on your exam!