A farmer with wheat in the fields and who uses the futures market to protect a profit is an example of:
A) a long hedge.
B) a short hedge.
C) selling futures to guard against a potential loss.
D) Both a long hedge and selling futures to guard against a potential loss.
E) Both a short hedge and selling futures to guard against a potential loss.

Question

Quizplus · Accepted Answer

The farmer uses a short hedge by selling futures contracts to lock in a price for the wheat, protecting against a potential drop in market prices.

A Farmer with Wheat in the Fields and Who Uses