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  • Gross Total Net Total 40: Short Hedge

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    GIRISH MAHAJAN
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    The document discusses how different market conditions impact short and long hedgers. It analyzes the benefits of strengthening and weakening contango and backwardation markets. When the basis strengthens in a contango market, short hedgers benefit from profits in the spot market and losses in futures. When the basis weakens in a contango market, long hedgers benefit from profits in futures and losses in the spot market. The same concepts apply for backwardation markets, with short hedgers benefiting from a strengthening basis and long hedgers benefiting from a weakening basis.

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    Hedge

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    Hedge

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    The document discusses how different market conditions impact short and long hedgers. It analyzes the benefits of strengthening and weakening contango and backwardation markets. When the basis strengthens in a contango market, short hedgers benefit from profits in the spot market and losses in futures. When the basis weakens in a contango market, long hedgers benefit from profits in futures and losses in the spot market. The same concepts apply for backwardation markets, with short hedgers benefiting from a strengthening basis and long hedgers benefiting from a weakening basis.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    18 views4 pages

    Gross Total Net Total 40: Short Hedge

    Uploaded by

    GIRISH MAHAJAN
    The document discusses how different market conditions impact short and long hedgers. It analyzes the benefits of strengthening and weakening contango and backwardation markets. When the basis strengthens in a contango market, short hedgers benefit from profits in the spot market and losses in futures. When the basis weakens in a contango market, long hedgers benefit from profits in futures and losses in the spot market. The same concepts apply for backwardation markets, with short hedgers benefiting from a strengthening basis and long hedgers benefiting from a weakening basis.

    Copyright:

    © All Rights Reserved
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    of 4

    (Bull) Market

    STRENGTHENING OF BASIS CONTANGO MARKET BENEFITS TO SHORT


    SHORT HEDGE
    Day Spot Futures
    1st Jun Buy 1530 2140 Sell
    15th Jun Sell 1680 2250 Buy
    Gross Total 150 110
    Net Total 40

    WEAKENING OF BASIS CONTANGO MARKET BENEFITS TO LONG HE


    LONG HEDGE
    Day Spot Futures
    1st March Sell 1300 1600 Buy
    15th March Buy 1820 2430 Sell
    Gross Total 400 830
    Net Total 430

    STRENGTHENING OF BASIS BACKWARDATION MARKET BENEFITS TO SHO


    SHORT HEDGE
    Day Spot Futures
    1st April Buy 1500 1200 Sell
    15th April Sell 1300 900 Buy
    Gross Total 200 300
    Net Total 100

    WEAKENING OF BASIS BACKWARDATION MARKET BENEFITS TO LONG


    LONG HEDGE
    Day Spot Futures
    1st Feb Sell 1930 1640 Buy
    15th Feb Buy 1670 1180 Sell
    Gross Total 260 460
    Net Total 200
    BENEFITS TO SHORT HEDGER

    Basis
    -610
    -570
    Profit from Spot and loss from Futures

    ENEFITS TO LONG HEDGER

    Basis
    -300
    -610
    Profit from Futures and loss from Spot

    KET BENEFITS TO SHORT HEDGER

    300
    400
    Profit from Spot and loss from Futures

    T BENEFITS TO LONG HEDGER

    Basis
    290
    490
    Profit from Futures and loss from Spot
    (Bear) Market

    STRENGTHENING OF BASIS CONTANGO MARKET BENEFITS


    SHORT HEDGE
    Day Spot Futures
    1st Jun Buy 1300 1700
    15th Jun Sell 950 1100
    Gross Total 350 600
    Net Total 250

    WEAKENING OF BASIS CONTANGO MARKET BENEFITS TO


    LONG HEDGE
    Day Spot Futures
    1st March Sell 1350 1550
    15th March Buy 1050 1320
    Gross Total 300 230
    Net Total 70

    STRENGTHENING OF BASIS BACKWARDATION MARKET BENEF


    SHORT HEDGE
    Day Spot Futures
    1st April Buy 1800 1700
    15th April Sell 1510 1320
    Gross Total 290 380
    Net Total 90

    WEAKENING OF BASIS BACKWARDATION MARKET BENEFIT


    LONG HEDGE
    Day Spot Futures
    1st Feb Sell 1350 1100
    15th Feb Buy 1020 930
    Gross Total 330 170
    Net Total 160
    (Bear) Market

    TANGO MARKET BENEFITS TO SHORT HEDGER


    SHORT HEDGE
    Basis
    Sell -400
    Buy -150
    Profit from Spot and loss from Futures

    ANGO MARKET BENEFITS TO LONG HEDGER


    LONG HEDGE
    Basis
    Buy -200
    Sell -270
    Profit from Futures and loss from Spot

    ARDATION MARKET BENEFITS TO SHORT HEDGER


    SHORT HEDGE

    Sell 100
    Buy 190
    Profit from Spot and loss from Futures

    RDATION MARKET BENEFITS TO LONG HEDGER


    LONG HEDGE
    Basis
    Buy 250
    Sell 90
    Profit from Futures and loss from Spot

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