A jewellery manufacturing company buys gold to make its products and faces a very competitive local market. The CEO is concerned that the price of gold has become more volatile and this may adversely affect profits in the near future. He wants to insure against uncertainty in the price of gold but pass on lower prices to his customers if the price moves favourably.

Which of the following hedge transactions is best suited to his needs?

Select one:

a. A long put on gold futures

b. A long call on gold futures

c. A long gold futures contract

d. A short put on gold futures