A farmer can hedge the risk of downward movement in the price of the produce by taking one of the following positions.
A)Buying a call option.
B)Selling a put option.
C)Buying a put option.
D)Buying a futures contract.

Question

Quizplus · Accepted Answer

Buying a put option allows the farmer to hedge against the risk of a price decline by giving them the right to sell their produce at a predetermined price, thus protecting against downward price movements.

A Farmer Can Hedge the Risk of Downward Movement in the Price