An increase in the basis will __________ a long hedger and __________ a short hedger.
A) hurt; benefit
B) hurt; hurt
C) benefit; hurt
D) benefit; benefit
E) benefit; have no effect upon

Question

Quizplus · Accepted Answer

An increase in the basis benefits a long hedger because it means the spot price has increased relative to the futures price, improving their position. Conversely, it hurts a short hedger as they would have to pay more to close their position.

An Increase in the Basis Will __________ a Long Hedger