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Short the basis

Posted by Svetlana Tokunova
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A hedger is said to be short the basis when he/she has a short cash position hedged with a long futures position. Long hedgers want to protect the price of a later cash commodity purchase or a short actuals position by hedging with a long futures position. Long hedgers want the basis to weaken since it will reduce the effective price of purchasing the commodity in the cash market at a later date.

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