Hedge To Arrive Contract

Categories: Futures,

Contract used in futures trading where the futures price is determined when the contract is created, but the basis level is not determined until later, usually just before delivery. A hedge to arrive contract is typically used for commodities such as grain. A seller may choose to use this type of contract when he or she believes that future prices are high and are about to drop, because this locks in the future price and only leaves the basis price to be determined in the future.