4.8 Short Hedge Suppose that F1: Initial Futures Price f: Final futures price 2 2 Final asset price entering into a short futures contract You hedge the future sale of an asset by Price Realized=S2+F1-F2=F1+ Basis Options, Futures, and other Drerivatives, 5th edition o 2002 by John C. HullOptions, Futures, and Other Drerivatives, 5th edition © 2002 by John C. Hull 4.8 Short Hedge • Suppose that F1 : Initial Futures Price F2 : Final Futures Price S2 : Final Asset Price • You hedge the future sale of an asset by entering into a short futures contract • Price Realized=S2+ (F1 –F2 ) = F1 + Basis