You are a Gold Exploration Company ("Company") with a licence to explore over one specific site only. If you find gold you then have the right to mine or extract the gold from this site. The preliminary geology analysis from some dirt samples has just come back and suggests you have located a very rich gold seam, with up to 0.5 million ounces of gold. The price of gold is at a historical high. As the manager of the Company you are very excited by this news and you immediately decide to hedge the Company's exposure to gold price risk by selling long-dated (up to 5 years expiry dates) goldfuturescontracts traded on a major US Futures Exchange Market.

Required.

However, just before you implement this action or strategy to sell gold futures contracts you speak to your Friend You ask your Friend to explain one advantage of entering into this strategy and two disadvantages or risks of this strategy.