Section 16

A shortage in a crop means an increase in price therefore it would be. Best to go

Long

when we are concerned that the price of something will go up, we go

Long hedge

In an Equity straddle

The option buyer is looking for market volatility. While the option seller is looking for market stability.

When a futures contact is excessed or at expiration the buyer must purchase at the contract price and the seller must

deliver at the contract price.

futures contracts can be written on

financial assets or commodities.

Rights are not redeemable by the issuer. They may be sold in the secondary market or be

given to someone else to exercise.

a short position in a futures contract will

increase in value if the underlying commodity or asset declines in value.

purchasing a futures contract for future delivery is considered taking a

long position.

Attaching warrants to a bond issue usually permits the bonds to be issued with a

lower interest rate.

A big crop means

more supply and lower prices when the crop is harvested.

An investor would write a call option to

obtain income

An investor who is long XYZ stock would consider going long an XYZ call to

protect against an increase in the market price of XYZ stock

Covered call writing is a strategy where an investor sells a call on a security he owns to

reduce the volatility of the stock's returns and to generate income with the premium

A speculator, believing that a drought in the Midwest will lead to a weak corn crop, would probably

take a long position in corn futures

A farmer who produces soybeans believes that this year's crop will be the biggest ever. The farmer would most likely hedge this risk by

going short soybean forwards