# Basis Change

#### YCHEN7458

##### New Member
Subscriber
Hi there, I have a question regarding basis change concept at BT P1.T3. reading (page 9):
* When the spot price increases by more than the future price, the basis increases, ... for a short(long) hedge position, it is favorable (unfavorable) to the hedger, as the price received (paid) for the asset will be higher.

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#### YCHEN7458

##### New Member
Subscriber
Hi @gsarm1987 , thanks for the reply again. I wrote an example and could you please let me know if my understanding is correct, Thanks!

Let says we purchase an asset at the spot price right now is 141.5 and the futures price for the short position is 141.25 (the net exposure is +0.5). Let says the market is bull and the price of the asset rises up to 150.5, and the futures price is 150 (the spot price increases by more than the futures price). The gain in the value of an asset is (150.5-141.5) and the loss from the short futures position is (150 -141.25) sum up as +0.25; on the other hand, for a long hedger: let’s assume the futures price for the long position is also 141.25, later be 150, the spot prices are 141.5 now and 150.5 later. The gain from the long futures position is (150-141.25) but he will suffer the loss from the asset (150.5-141.5) because he could purchase it at the beginning, and the loss from the asset is larger than gain from the long futures position, therefore, the long hedger is in the unfavourite position.

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#### gsarm1987

##### Member
Subscriber
Hi @gsarm1987 , thanks for the reply again. I wrote an example and could you please let me know if my understanding is correct, Thanks!

Let says we purchase an asset at the spot price right now is 141.5 and the futures price for the short position is 141.25 (the net exposure is +0.5). Let says the market is bull and the price of the asset rises up to 150.5, and the futures price is 150 (the spot price increases by more than the futures price). The gain in the value of an asset is (150.5-141.5) and the loss from the short futures position is (150 -141.25) sum up as +0.25; on the other hand, for a long hedger: let’s assume the futures price for the long position is also 141.25, later be 150, the spot prices are 141.5 now and 150.5 later. The gain from the long futures position is (150-141.25) but he will suffer the loss from the asset (150.5-141.5) because he could purchase it at the beginning, and the loss from the asset is larger than gain from the long futures position, therefore, the long hedger is in the unfavourite position.
@YCHEN7458 spot on!