Futures contracts trade with every month as a delivery month. A company is hedging the purchase of the underlying asset on June 15 . Which futures contract should it use?
A. The June contract
B. The July contract
C. The May contract
D. The August contract
B
As a general rule the futures maturity month should be as close as possible to but after the month when the asset will be purchased. In this case the asset will be purchased in June and so the best contract is the July contract.
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