Multiple Choice

40. A short hedger wishes to establish a collar. The futures price is $5.00/bu. Option 1 has a strike price of $6.00 and a premium of $0.20. Options 2 has a strike price of $4.00 and a premium of $0.20. To set up a short collar this hedger should: a. buy option 1 and option 2 b. buy option 1 while selling option 2 c. sell both options d. sell option 1 while buying option 2