Chartered Investment Manager (CIM) Practice Exam · Question
A Canadian agricultural firm expects to sell its wheat harvest in six months and is concerned about a potential decline in wheat prices. Which futures strategy could help mitigate this price risk?
Selling wheat futures contracts allows the firm to lock in a price for their future harvest, effectively hedging against a drop in spot wheat prices.
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Question: A Canadian agricultural firm expects to sell its wheat harvest in six months and is concerned about a potential decline in wheat prices. Which futures strategy could help mitigate this price risk?
Answer options:
- Buying wheat futures contracts. ✅ Selling wheat futures contracts.
- Buying call options on wheat futures.
- Selling put options on wheat futures.
Correct answer: Selling wheat futures contracts.
Explanation: Selling wheat futures contracts allows the firm to lock in a price for their future harvest, effectively hedging against a drop in spot wheat prices.
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