A farmer that grows strawberries will after the summer need to purchase new machinery, and is therefore a bit concerned about what the demand will be like around midsummer. The farmer ask you for help and wonder if you know a way of insuring the profits.

The correlation between strawberry- and umbrella- prices are -1.

Which of the following contracts would you recommend the farmer:

Select one:

a. Do nothing, the demand will obviously be great!

b. Go short on futures contract(s) on umbrellas

c. Go short a put option on strawberries

d. Go short on forward contract(s) on strawberries.

e. Go long on futures contract(s) on strawberries