Should it enter into a long or short position on futures

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Reference no: EM131816216

Assume that it is now October 15, 2006. An American company makes a sale for which it will receive £125,000 on January 1, 2007. The company may choose not to hedge, or to enter into 2 futures contracts (contract size £62500), or to enter into 4 put option contracts (contract size £31,250). If the company chooses to hedge with the futures contracts, should it enter into a long or a short position on the futures?

Reference no: EM131816216

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