Producers who hedge through the purchase of put options must remember that they may be:
A)Reducing their profits compared to not hedging
B)Obligated to sell their product at a lower than market price
C)Increasing their overall risk
D)Facing unlimited price risk

Question

Quizplus · Accepted Answer

Purchasing put options involves a premium cost, which can reduce profits if the market price does not fall below the strike price of the option.

Producers Who Hedge Through the Purchase of Put Options Must