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:

Horizontal

Relating to or situated at the same level in a hierarchy, often implying equal status or the absence of a hierarchical structure.

Unitary

Pertaining to a single entity or element; uniform.

Creativity Process

The sequence of thoughts and actions that lead to the generation of new and original ideas, concepts, or solutions.

Steps

Sequential actions or procedures followed in order to achieve a specific goal or complete a process.