AgriCrop Company produces and sells soybeans. The firm plans to harvest its current crop of soybeans...
AgriCrop Company produces and sells soybeans. The firm plans to harvest its current crop of soybeans in six months and is concerned about price volatility in the soybean market. Which of the following would be considered a valid strategy for hedging this exposure?
|
a. |
"Buy" soybean futures (take a "buyer's" position in a futures contract) |
|
b. |
"Sell" soybean futures (take a "seller's" position in a futures contract) |
|
c. |
Write (sell) put options on soybeans |
|
d. |
Hold (buy) call options on soybeans |
| e. | Both b and c |
Homework Answers
As the company is concerned that the price will fall, so the hedge should benefit when price falls. Hence, "Sell" soybean futures (take a "seller's" position in a futures contract)
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