This chapter turns hedging theory into calculations. It covers the cash-futures basis, how basis changes affect hedgers, and how to calculate the net result and effective price of a hedge.
What You'll Learn
| Unit | Focus |
|---|---|
| Short Hedging and Long Hedging | Anticipatory hedges and long versus short the basis |
| The Basis | Basis formation, basis changes, grades, locations, and financial markets |
| Hedging Calculations | Net hedge result and net price received or paid |
| Examples | Applying the framework across commodity and financial markets |
Chapter Strategy
Use one definition consistently: basis = cash price minus futures price. Then identify the cash position first. A future seller short-hedges; a future buyer long-hedges.