The user of a commodity who is trying to insure against the price of the commodity rising would:
A)Take the short position in a futures contract.
B)Take the long position in a futures contract.
C)Be better off speculating on price movements and earning higher profits.
D)Want to hedge by selling a futures contract.

Question

Quizplus · Accepted Answer

Taking the long position in a futures contract allows the user to lock in a purchase price for the commodity, thus insuring against the risk of price increases.

The User of a Commodity Who Is Trying to Insure