A miller who needs wheat to mill to flour uses the futures market to protect a profit by:
A)a long hedge to take delivery.
B)a short hedge to deliver.
C)buying futures to guard against a potential loss.
D)Both A and C.
E)Both B and C.

Question

Quizplus · Accepted Answer

A long hedge is used to protect against a potential loss by taking delivery of the underlying asset, while buying futures is also used to protect against a potential loss.

A Miller Who Needs Wheat to Mill to Flour Uses