Price and hedging scenario calculator

If I lock a futures price, what price do I end up with in each market case?

Worked out as the short hedge net price: locked futures plus basis.

Currency

What you lock in

Futures price you lock in todayThe futures contract price you are closing now, per unit. Example: 12.00.

Expected basis at deliveryWhat your local buyer pays minus the futures quote. Almost always negative, so write the minus sign. It comes from your own price record, as the average of recent readings for the same location and the same contract month. Example: −1.20.

How much you cover

Expected productionHow much you expect to harvest, in your own unit. Example: 1,000.

How much you cover with futuresHow many units the short position covers, in the same unit as production. Example: 600.

The price range to test

Lowest market price to testThe bottom of the price range you want to see at delivery. Example: 9.00.

Highest market price to testThe top of the same range. Example: 15.00.

The basis that showed up (optional)

Basis that showed up at deliveryOptional. The basis on delivery day, once it exists, to see what basis risk cost you. It also takes a minus sign. Example: −1.60.

The math runs in your browser. We do not send or store anything you type.

Your result

Enter the locked futures price and the expected basis to see the effective price. Add production, cover and the price range, and the scenario ladder appears.

Take the scenario ladder in writing

The report carries your figures, the effective price with its reading, the calculation trail step by step, the five-scenario ladder and the realized-basis case, in a document you can print and take to the table where the call gets made.

ArticleAfter you hedge, what price do you actually keep?The effective price step by step, with the same worked example as this tool, to the number. It shows what a hedge takes away, what it charges in cash before delivery, and why the basis is what is left uncertain.Read the full article

Price and hedging scenario

Your inputs

Your result

Calculation trail

What these numbers say

The effective price is what the covered share receives in any market case: the futures price you locked plus the expected basis. The share you cover decides how much of the swing leaves your average price. What stays uncertain after locking is the basis, and the last table shows what it cost when it came in different from expected.

Understand the method in full

The full article shows the effective price step by step, what a hedge charges in cash before delivery, and why the basis is what is left uncertain.

Read the full article

How to read it

Locking a futures price fixes the futures level, not the price you receive. What is left uncertain is the basis, and the expected basis here is your own forecast, usually the average of recent readings for the same location and the same contract month. It can come in better or worse, and the realized-basis block exists to measure the gap afterwards. The ladder shows what each market price would deliver with the basis you typed, not a price projection.

The sources

Locking a futures price does not fix the price you receive: it fixes the futures level. What you receive is that level plus your buyer’s basis, and the basis is exactly what stays uncertain. Enter the futures price you locked, the expected basis and how much of your production you cover, and see the effective price across five market cases.

Lock 12.00 a unit against an expected basis of 1.20 under and the covered share earns 10.80 at delivery, whatever the market does: cover 600 of 1,000 units and the average price travels between 10.08 and 12.48 while the market travels between 9.00 and 15.00.

CME Group’s self-study guide states the consequence flatly, that once you establish a hedge the futures level is locked and the only variable is basis. The tool works the effective price and a five-case ladder off that, and it does not judge whether today’s futures price is high, which is the reader’s own read of the market.