Question

2) One day about 60 years ago, Jed Clampett was out gathering food when an errant...

2) One day about 60 years ago, Jed Clampett was out gathering food when an errant shot brought forth bubbling crude (oil, that is). Jed has since become a major petroleum producer. Recently, he has become concerned about the increased sources of production around the world, enough so that he’d like to protect his earnings from oil price volatility. Should Jed be a long hedger or a short hedger of crude oil?

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Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Suggestion:

Go short on hedge contract(s) of oil.  

Explanation:

The person is afraid of oil prices falling. He should hedge his position in such a way that if price fall, he gets a profit from it.

In this case, when he goes short on hedge contract(s) on oil, as the price falls he will get the money. So that he will be able to recover his money from forward contract when the prices falls.

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