Question

"When the futures price of an asset is less than the spot price, long hedges are likely to be particularly attractive." Explain this statement.

   "When the futures price of an asset is less than the spot price, long hedges are likely to be particularly attractive." Explain this statement.

Options, Futures, and Other Derivatives

Options, Futures, and Other Derivatives

John C. Hull 10th Edition

Chapter 3, Problem 15

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The "futures price" is the agreed-upon price for a transaction that will occur at a future date, while the "spot price" is the current market price of the asset. A "long hedge" involves buying futures contracts to protect against potential price increases in the Show more…

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"When the futures price of an asset is less than the spot price, long hedges are likely to be particularly attractive." Explain this statement.

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