Over the past few months, gold price has increased with heightened tensions in the Middle East. However, in recent days, the price of gold begins to bounce back to normal level due to several rounds of global peace talk. Consider a trader working for an investment bank. The trader took a long position in a forward contract at the onset of the gold price increase several months ago, and she is now concerned of losing any unrealized gains made on the original long forward position. As such, the trader takes a short position in the gold spot market.

How would you describe the trader's initial position when she long the forward several months ago, and current position when she short gold in the spot market?

A:The trader hedged several months ago, and she is now also hedging

B:The trader hedged several months ago, and she is now speculating

C:The trader speculated several months ago, and she is now hedging

D:The trader speculated several months ago, and she is now also speculating

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The detailed answer for the above question is provided below The correct answer is C ... View the full answer