Problem 1: On September 1, 2020 a commodity's spot price is $60 and its March 2021 futures price is $59. On December 1, 2020 the spot price is $64 and the January 2021 futures price is $63.50. A company entered into futures contracts on September 1, 2020 to hedge its sale of the commodity on December 1, 2020. It closed out its position on December 1, 2020. Which position the company should take in the futures market on September 1, 2020 and what is the effective price (after taking account of hedging) paid by the company?
a. Short position; effective price = $60.50
b. Short position; effective price = $59.50
c. Long position; effective price = $59.50
d. Long position; effective price = $60.50