A company would like to hedge against a change in price of oil in the future....
A company would like to hedge against a change in price of oil in the future. assuming they decide to hedge in the futures market. would they be going short or long?
Homework Answers
Hedging is done to cut down the future loss on position an investor.
If company is holds a long position as seller of the oil then firm should decide the maximum price downside they can absorb in their financial and short the price of oil in the market so that if even price falls, they get minimum price they shorted in market.
If firm hold a long position as seller they should short the price of oil and vice and versa.
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A company would like to hedge against a change in price of oil
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