Question
A soybean processor wants to hedge the prices of soybeans, soybean meal and soybean oil, and hence hedge its profit margin. The manager of the
A soybean processor wants to hedge the prices of soybeans, soybean meal and soybean oil, and hence hedge its profit margin. The manager of the processing facility decides to use options to hedge the profit margin. Which statement(s) below is(are) correct?
Group of answer choices:
At the end of the hedge, the processor will choose not to exercise its puts on soybean meal only if the futures price for soybean meal is then higher than the strike of the puts.
The processor is buying calls to establish a maximum buying price for soybeans.
At the end of the hedge, the processor will choose to exercise its calls only if the futures price for soybeans is then higher than the strike of the calls.
The processor is selling puts to establish a minimum selling price for soybean oil.
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