Strategies · Library · Futures
§10.1Hedges and structures
Hedging risk with futures
A firm that will need or sell a commodity later takes the matching futures position now to lock the price.
- Asset class
- Futures
- Held for
- Varies
- Data
- ARCANE has part of the data
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Planned exposure and its date.
- Entry and exit
- Open at the start, close at delivery.
- Sizing
- Matches exposure.
How it fails
- Basis risk
- Margin calls
- Size mismatch
Data it needs
- futures prices
Front futures prices exist.
How ARCANE uses it
Background only.
A hedge, not a return source.
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §10.1, p. 93 of the SSRN version. Described in our words. Hedges and structures is ARCANE’s filing, not the book’s.