If a farmer wants to protect the value of their unharvested crop, they should a. buy...
If a farmer wants to protect the value of their unharvested crop, they should
a. buy in the futures market thereby gaining a short position in it
b. sell in the futures market thereby gaining a long position in it
c. sell in the futures market thereby gaining a short position in it
d. buy in the futures market thereby gaining a long position in it
e. none of the above
Homework Answers
Ans - (D)
If he wants to protect the value of unharvested crop ,he can buy forward contract in the future market and thereby gain a long position in it. If you buy a contract you gain a long position and if you sell a contract then you gain a short position.
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