Hedging Strategies in the Lumber Futures Market

The essential element in all lumber hedging, except contract grade lumber, is evaluation of the contract-noncontract basis and the cash-futures basis to determine whether hedging will improve profits without undue risk. In an example, a specific hedging strategy is developed: holding low-priced utility lumber 2 by 4’s in inventory while selling futures to protect the inventory from price risk until cash and futures prices converge at an expected time in the future.

You must be logged in to download any documents. Please login (login accounts are free) or learn how to Become a Member