You manage a plantation of orange trees. Each year, you harvest the oranges and sell them at the local fruit market. Of course, there is considerable uncertainty over what the market price of oranges will be at the time of harvest. Futures contracts can be traded where the underlying variable is the price of oranges.

What position will you enter in orange futures to hedge your exposure?

Select one:

A long futures position.

A short futures position.

It depends on whether you believe the price of oranges is about to rise or fall before harvest.

There is no exposure because you will always have oranges to sell.