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.
A)Buying call options on copper
B)Selling copper futures
C)Buying copper futures
D)Selling copper call options

Question

Quizplus · Accepted Answer

Selling copper futures is the best choice as it allows the producer to lock in a future selling price for their copper, regardless of whether the market price goes up or down. Buying call options on copper or buying copper futures would not provide the same level of hedging against downward price movements. Selling copper call options would actually increase the producer's exposure to downside risk.

A Copper Producer Is Worried About the Copper Prices Going