What form of hedging would you suggest for a producer that wishes to be protected from future price decreases but wants to benefit from any future price increases?
A) Buy a call option on the asset
B) Sell a call option on the asset
C) Buy a put option on the asset
D)Sell a put option on the asset

Question

Quizplus · Accepted Answer

Buying a put option on the asset allows the producer to sell the asset at a predetermined price, protecting against price decreases while still allowing them to benefit from any price increases, as they are not obligated to exercise the option if the market price is more favorable.

What Form of Hedging Would You Suggest for a Producer