I export coffee. I will have $37,500$ pounds of coffee ready to sell$/$export in March of $2025.$ I see that the March $2024$ coffee futures contract is trading at $500$ today $($cents per pound$).$ I am confident that once March of $2025$ rolls around, I can easily find someone who will want to buy my coffee.

For purposes of this question, let's assume that once we reach March of $2025,$ the value of the March coffee futures contract went from $500$ to $60.$

Why would I want to sell one $(1)$ March $2025$ futures contract today? Why is this first step so important?

A$.$

Because I know that if I buy one $(1)$ March coffee futures contract today at $500,$ the price of the contract can go down to $60$ and I am protected as long as I sell the contract back at its new price of $60$ before the contract expires in late March.

In this case, I bought the contract at $500,$ sold it for $60.$ I lost $440.$ This loss offsets the fact that I can now get $500$ for my coffee.

B$.$

Because I know that if I sell one $(1)$ March coffee futures contract today at $500,$ the price of the contract can go down to $60$ and I am protected as long as I buy the contract back at its new price of $60$ before the contract expires in late March.

In this case, I sold the contract at $500,$ bought it back at $60.$ I made $440.$ This profit offsets the fact that I can only get $60,$ the new market price for coffee for March $2024$ delivery.

C$.$

We don't have enough information to answer this question.

D$.$

Because I know that if I sell three $(3)$ March coffee futures contract today at $500,$ the price of the contract can go down to $60$ and I am protected as long as I let the contract expire in late March.

In this case, I sold the contract at $500$ and let it expire. I earned the right to sell my coffeee for $500.$ I end up making a total of $60$ cents per pound.