What Form of Hedging Would You Suggest for a Producer

question 23

Multiple Choice

What form of hedging would you suggest for a producer that wishes to be protected from future price decreases but wants to benefit from any future price increases?

• A) Buy a call option on the asset
• B) Sell a call option on the asset
• C) Buy a put option on the asset
• D)Sell a put option on the asset

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Definitions:

Market Shares

The portion of a market controlled by a particular company or product.

Natural Monopoly

A natural monopoly occurs when a single firm can supply a market's entire demand for a good or service at a lower cost than any potential competitor, often due to high fixed or startup costs.

Antitrust Law

Legislation aimed at preventing anti-competitive practices, monopolies, and fostering fair competition in the market.

Product Price

The financial cost at which a good or service is sold to consumers in the market.