A Canadian pension fund manager wants to gain exposure to future movements in the price of crude oil without directly purchasing and storing physical commodities. The fund has a mandate that allows the use of derivatives for investment purposes. Which derivative contract would be most appropriate for achieving this objective?

Question: A Canadian pension fund manager wants to gain exposure to future movements in the price of crude oil without directly purchasing and storing physical commodities. The fund has a mandate that allows the use of derivatives for investment purposes. Which derivative contract would be most appropriate for achieving this objective?

Answer options: ✅ Entering into a long position on a crude oil futures contract.

• Purchasing an equity call option on an oil exploration company.
• Entering into a short position on a crude oil futures contract.
• Purchasing segregated funds that primarily invest in energy sector equities.

Correct answer: Entering into a long position on a crude oil futures contract.

Explanation: A long position in a crude oil futures contract provides direct exposure to the price movements of crude oil without the logistical challenges of physical ownership. Purchasing options on individual companies does not provide direct commodity exposure, and segregated funds invest in equities, not the commodity itself. A short futures position implies a bearish view.