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:

Sympathetic Nervous System

Part of the autonomic nervous system that prepares the body for physical activity by accelerating the heart rate, constricting blood vessels, and raising blood pressure.

Parasympathetic Nervous System

The part of the autonomic nervous system responsible for rest and digestion, often counterbalancing the sympathetic nervous system's "fight or flight" response.

Midbrain

A portion of the brainstem involved in vision, hearing, motor control, sleep/wake, arousal (alertness), and temperature regulation.

Hindbrain

The rear division of the brain, responsible for regulating basic life functions such as heart rate and respiration, and coordination of movement.