Welcome to Hedging Calculations, the unit that turns the basis ideas from the previous two units into actual numbers. You already know a hedger holds two positions at once (the physical commodity plus an offsetting futures contract) and that the basis is the cash price minus the futures price. Here you put those together to compute a hedge's net result and the net price a hedger effectively receives on a sale or pays on a purchase.
Exam Weight: Part 1 spans ~71% of the exam across Chapters 1-7 combined; the National Futures Association (NFA) does not publish per-unit weights.
Video Resources
What You'll Learn
In this unit, you'll cover:
- Net Result of a Hedge: Why a hedge's outcome is the sum of both legs (cash-market result plus futures-market result), the sign rule for a futures gain on a short versus a long position, and fully worked short-hedge and long-hedge examples where the futures leg offsets the cash move
- Net Price Received Upon Purchase or Sale: The single formula that gives both a seller's net selling price and a buyer's net buying price (initial futures price plus the ending basis), worked examples for each side, why a stronger basis helps the seller while a weaker basis helps the buyer, and how a brokerage commission trims the result
Why This Matters
Every calculation in this unit collapses to one line: net price equals the initial futures price plus the ending basis. That single formula works for a producer selling grain and a processor buying it. The traps are all about signs and timing: which leg gained, whether the basis is over or under, and (the favorite) whether you anchored to the basis at the start or at the lift. Keep cash-minus-futures straight and the arithmetic falls out.
Let's start with the net result of a hedge.