The correct answer is A.

Metallgesellschaft Refining and Marketing (MGRM) is infamous for its hedging debacle in the early 1990s. The firm committed to selling large quantities of heating oil and gasoline to customers at fixed prices for up to 10 years. To hedge the risk of rising oil prices, MGRM used a strategy known as "stack-and-roll."

In a stack-and-roll hedge, MGRM bought short-term futures contracts (mostly one to three months to expiration) equivalent to the entire volume of its long-term delivery commitments. This is the "stack." As these short-term contracts approached expiration, MGRM would close them out and buy new short-term contracts to maintain the hedge. This is the "roll."

This strategy exposed MGRM to significant rollover risk (or basis risk). When oil prices fell sharply, MGRM faced massive margin calls on its long futures positions. Because the markets were in contango (short-term prices were lower than longer-term prices), rolling the contracts forward led to consistent losses. Furthermore, the gains on their physical forward contracts (which were now in the money) could not be immediately realized to offset the cash outflow required for the futures margin calls, leading to a severe liquidity crisis.

Choice B, C, and D are incorrect. While these are valid risk management or trading strategies, they were not the defining strategy used by MGRM to hedge its long-term forward commitments.