A:

A book-the-basis contract is the same as a hedge-to-arrive contract (HTAC). Both have been used widely since the earlier 1990s. The four types of hedge-to-arrive contracts can range from straightforward to relatively complex and risky. In addition, some can be far riskier than typical speculation in the futures market. The four types of hedge-to-arrive contracts are: non-roll, intra-year rolling, inter-year rolling (which involves one year of production), and multi-year rolling.



These contracts allow the seller to set the futures level on the contract date, while also permitting the seller to decide the basis level at a later time. These permissions, in effect, transfer risk from the seller to the buyer on the stipulated contract date.



This question was answered by Richard C. Wilson.



RELATED FAQS

  1. How does fundamental analysis differ from technical analysis?

    Learn about the differences between technical analysis and fundamental analysis, such as how these investment strategies ...
  2. How can an investor profit from a fall in the chemicals sector?

    Learn how investors profit from declines in the chemicals sector by employing speculation methods, such as short selling, ...
  3. Is it better to use fundamental analysis, technical analysis or quantitative analysis ...

    Understand the difference between fundamental, technical and quantitative analysis, and how each measurement helps investors ...
  4. How do day traders capture profits from the difference between bid and ask prices?

    Discover how day traders capture profits from the difference between bid and ask spreads. These spreads blow out during volatile ...
RELATED TERMS
  1. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
  2. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  3. Indicator

    Indicators are statistics used to measure current conditions ...
  4. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  5. Forex Spread Betting

    A category of spread betting that involves taking a bet on the ...
  6. Mass Index

    A form of technical analysis that looks at the range between ...

You May Also Like

Related Articles
  1. Charts & Patterns

    Are These the Top 3 Value Stocks of ...

  2. Chart Advisor

    Defensive? Eye Infrastructure via the ...

  3. Trading Strategies

    Market Timing Tips & Rules You Should ...

  4. Chart Advisor

    Commodity Traders Are Using This ETF ...

  5. Trading Strategies

    Trading Risks And Rewards In Your Favor

Trading Center