Hend Abuenein
Active Member
Hi
I hate it when I have to ask questions from the bottom basics, but here it is:
I don't understand why is it that when an oil producer is in an agreement to supply a certain amount of oil and wants to hedge the risks we are told that he has to LONG future contracts, either in a strip or a stack hedge.
Why LONG when he is an oil PRODUCER?
He owns the underlying commodity, so is long it, so shouldn't he SHORT future contracts as per the supply agreement to lock in a good price ?
Thanks
Hend
I hate it when I have to ask questions from the bottom basics, but here it is:
I don't understand why is it that when an oil producer is in an agreement to supply a certain amount of oil and wants to hedge the risks we are told that he has to LONG future contracts, either in a strip or a stack hedge.
Why LONG when he is an oil PRODUCER?
He owns the underlying commodity, so is long it, so shouldn't he SHORT future contracts as per the supply agreement to lock in a good price ?
Thanks
Hend