Which of the Following Players Would Require a Put Option

question 3

Multiple Choice

Which of the following players would require a put option in order to hedge their natural position in the market?

• A)A farmer who buys corn to feed his livestock
• B)A farmer who sells peanuts to a chocolatier
• C)A farmer who has financed his land with a floating rate mortgage
• D)A miller who buys wheat from a farmer

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Definitions:

Common Stock

A type of equity ownership in a corporation, representing a claim on a portion of the profits and assets, and giving voting rights in corporate decisions.

Net Income

The total profit of a company after all revenues, costs, and expenses have been deducted.

Stock Option Information

Details and specifics regarding stock options, which are securities granting the holder the right to purchase or sell stock at a specified price within a defined time period.

Financial Statements

Consolidated documents reporting the financial activities and condition of a business, including the balance sheet, income statement, and cash flow statement.