In general, when deciding whether a market participant needs to buy or sell futures contracts in order to hedge, the rule could be:
A)Buy futures if you have the underlying asset and sell futures if you need the underlying asset
B)Sell futures if you have the underlying asset and buy futures if you need the underlying asset
C)Buy futures if you want to speculate, sell futures if you want to hedge
D)Buy futures if you are willing to have unlimited risk, sell futures if you want capped risk

Question

Quizplus · Accepted Answer

The general rule for hedging with futures contracts is to sell futures if you have the underlying asset and buy futures if you need the underlying asset. This allows the market participant to lock in a price for the asset and offset any potential losses with gains from the futures contract.

In General, When Deciding Whether a Market Participant Needs to Buy