A miller who needs wheat to mill to make ﬂour uses the futures market to protect a proﬁt by:
A)A long hedge to take delivery.
B)A short hedge to deliver.
C)Buying futures to guard against a potential loss.
D)Both A and C.
E)Both B and C.

Question

Quizplus · Accepted Answer

A miller who needs wheat to mill to make flour uses the futures market to protect a profit by taking a long hedge to take delivery, ensuring the availability of the wheat at a fixed price when needed. Additionally, the miller can also buy futures to guard against a potential loss if the market price for wheat increases. Therefore, both options A and C are the best choices for protecting the miller's profitability in the futures market.

A Miller Who Needs Wheat to Mill to Make ﬂOur