• Suppose that you buy oat to make breakfast cereals and trade oat futures to hedge input price risk. Your factories are located far from places where oat may be delivered as per contract terms. Your assistant prepares for you the following table based on price changes for oat spot and futures.

Which contract would you choose to obtain the best hedge?

Futures Contracts	Correlation of Price Changes	Variance of Basis
Previous month futures	0.79	3.20
Spot month futures	0.89	0.88
Next month futures	0.87	0.99
Sixth month futures	0.71	9.80

Group of answer choices

a. previous month futures

b. spot month futures

c. next month futures

d. sixth month futures