You hold 1 million barrels of oil each of which is currently worth $25 per barrel. The current quoted futures price for delivery of oil in 1 years time is $26.25 per barrel. You want to hedge your spot oil position by using futures. How do you hedge and if, in 11 months time, the spot price of oil is $20 per barrel and the futures price (for delivery in 2 weeks) is $20.04 per barrel, what is the effective value of your hedged position at that time?

a. go short the futures and the effective value of the hedged position is $26.22m

b. go short the futures and the effective value of the hedged position is $26.21m

c. go long the futures and the effective value of the hedged position is $20.042m

d. go short the futures and the effective value of the hedged position is $26.25m