A long hedge is a strategy used to protect against price increases in the underlying asset. This is achieved by taking a short position in the futures market, which will profit if prices rise, and a simultaneous long position in the spot market, which will experience losses if prices rise. Therefore, choice D, a short position in the spot market with a simultaneous long position in the futures market, is the correct answer.

Solved

A Long Hedge Is

Question 12

Multiple Choice

A long hedge is

A) a long position in the spot market and a simultaneous short position in the futures market.
B) a long position in the spot market and a simultaneous long position in the futures market.
C) a short position in the spot market and a simultaneous short position in the futures market.
D) a short position in the spot market with a simultaneous long position in the futures market.
E) none of these.

Correct Answer: