Factors Affecting Option Premium Values , RM2-29.0. Risk Management Curriculum Guide. Texas Agricultural Extension Service. Options on Agriculture Futures . The Futures Market Using BFP Futures to Hedge Figure 1 Milk Basis Basis is the difference between the local cash price and the futures price.
Basis accounts for transportation costs, quality differences, and local market conditions.
Several years of historical price data should be used to calculate the basis. Basis data used should correspond to the time the hedge is lifted or completed. Basis can be seasonal and cyclical. 3.55 1.51 1.96 Margin Account Requirements Trading futures contracts requires that a margin account be established. Does not apply to buying options.