A copper producer is worried about the copper prices going down.The risk of downward movement in prices can be hedged by taking one of the following positions.

Question

Quizplus · Accepted Answer

Selling copper futures would provide protection against the risk of copper prices going down, as the seller is obligated to deliver copper at the set price even if market prices have dropped. Buying call options or buying copper futures would not necessarily provide protection, as prices could still go down and result in losses. Selling put options would have the opposite effect of what is desired, as it would require the seller to purchase copper at the set price even if market prices have dropped.

A Copper Producer Is Worried About the Copper Prices Going