Question

Suppose a soy milk company has projected a need of 10,000 bushels of soybeans for the...

Suppose a soy milk company has projected a need of 10,000 bushels of soybeans for the next six months. What is the strategy for the company to hedge the price uncertainty of soybeans? (Standard soybean futures size is 5,000 bushels per contract)

Group of answer choices

none of the above

short 2 soybean futures

long 2 soybean futures

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Answer #1

The Soy Milk Company, will buy the buahels from the market and he is worried about the price rise and taking long position makes profits when the prices rise and will compensate the loss from the price rise.

No. of Long Futures will be = 10,000 / 5000 = 2 futures.

Option C is correct. long 2 soybean futures.

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