Which of the following players would require a put option in order to hedge their natural position in the market?
A)A farmer who buys corn to feed his livestock
B)A farmer who sells peanuts to a chocolatier
C)A farmer who has financed his land with a floating rate mortgage
D)A miller who buys wheat from a farmer

Question

Quizplus · Accepted Answer

A farmer who sells peanuts to a chocolatier would require a put option to hedge against the risk of falling peanut prices. This option gives them the right to sell their peanuts at a predetermined price, protecting them from price decreases.

Which of the Following Players Would Require a Put Option