In which of the following situations would you hedge using a futures contract?
A. You are long in the cash market, the price is at a historical high, and you are certain that the price will decline.
B. You are long in the cash market, the price is at a historical low, and you are certain that the price will increase.
C. You are short in the cash market, the price is at a historical high, and you are certain that the price will decrease.
D. You are short in the cash market, the price is at a historical low, and you are certain that the price will decrease further.
Ans: A. You are long in the cash market, the price is at a historical high, and you are certain that the price will decline.
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