Best Brewery (BB) management is concerned about the price of barley needed to produce beer next summer. BB normally buys its supply of malting barley for summer beer sales in March so that the beer production process will be finished by the beginning of summer. Currently, March futures contracts on Malting Barley are trading with a futures price of $150 per metric tonne. Options per metric tonne of Malting Barley are available as follows: Calls with exercise price of $148 per metric tonne are priced at $20 each. Puts with exercise price of $146 per metric tonne are priced at $16 each.
a. What hedging strategy using Futures can BB implement? Be sure to indicate whether it is a long or short futures strategy and briefly explain what it means. b. What hedging strategy using options can BB implement? Only consider long strategies; be sure to indicate whether it is a long call or long put strategy and briefly explain what it means.