Question of the Week
Which of the following would be considered a short hedge?
Long the commodity and short the futures
b) Short the commodity and long the futures
c) Long the commodity and long the futures
d) Short the commodity and short the futures
The correct answer is a) Long the commodity and short the futures.
short hedge or selling hedge is when you are long
the commodity (cash commodity) and short the futures
contract on that commodity. A buying or long hedge
would be shorting the commodity and buying the futures.
© 2004 American Investment Training, Inc.