Welcome to Short Hedging and Long Hedging, the unit that deepens the short and long hedges from the hedging-theory unit in Chapter 1 into two ideas the exam loves to trap you on: anticipatory hedges (protecting a position you will hold but do not yet) and the "long the basis / short the basis" framing that renames those same short and long hedgers from a new angle.
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:
- Anticipatory Hedges: How a hedger protects a cash position they only expect to hold (a crop still in the field, a purchase committed for later), why an anticipatory hedge is defined by timing rather than different mechanics, and why the producer who will sell later is still a short hedger while the buyer who will purchase later is still a long hedger
- Long the Basis and Short the Basis: How basis (cash price minus futures price) strengthens and weakens, why the short hedger is "long the basis" and the long hedger is "short the basis," and which basis move each one benefits from
Why This Matters
This is the single most direction-flippable material on the exam. A question can pair a hedger with the wrong futures leg, flip the basis label against the futures position, or call a rising-but-still-negative basis "weakening," and every one of those is a trap. Get the cash position straight and the rest follows: it fixes the futures action, the basis position, and the basis move that helps.
Let's start with anticipatory hedges.