A hedge can protect price and still demand cash
Synthetic educational example — not client data or performance. All prices, quantities and collateral figures are hypothetical. This is not an investment recommendation, company forecast, real exchange specification or proposed remedy.
an input buyer expects 100,000 units. Physical price rises from 3.00 to 3.20 per unit, adding 20,000 to purchase cost. Assume a perfectly matching 100,000-unit long hedge for illustration only; a matching 0.20 gain offsets 20,000 before costs. Now change actual consumption to 80,000: physical cost increases 16,000 while the assumed hedge gain remains 20,000, demonstrating volume mismatch. Do not present this as a real contract, recommended hedge or proof that a hedge always succeeds.
Final economics
Direction: hypothetical long hedge for an input buyer. Multiplier: 1. Prices: USD per hypothetical unit. Assumed costs: USD 500. These are not exchange contracts or recommended hedge quantities.
| scenario | unit_label | physical_units | hedged_units | initial_physical_price | final_physical_price | initial_hedge_price | final_hedge_price | multiplier | physical_cost_increase | hedge_gain_before_costs | assumed_costs | net_additional_cost |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| matching_volume | hypothetical_units_not_an_exchange_contract | 100000 | 100000 | 3 | 3.2 | 3 | 3.2 | 1 | 20000.0 | 20000 | 500 | 500.0 |
| lower_actual_consumption | hypothetical_units_not_an_exchange_contract | 80000 | 100000 | 3 | 3.2 | 3 | 3.2 | 1 | 16000.0 | 20000 | 500 | -3500.0 |
| adverse_basis_difference | hypothetical_units_not_an_exchange_contract | 100000 | 100000 | 3 | 3.25 | 3 | 3.2 | 1 | 25000.0 | 20000 | 500 | 5500.0 |
Separate interim collateral path
The declared initial collateral of USD 40,000 and all variation amounts are synthetic. Entry, interim, final and return are distinct payment events, not same-day net cash. Physical purchase payments and the USD 500 assumed cost above are not included in this collateral schedule. The P&L column is incremental at each event: −20,000 then +40,000 totals +20,000. Returning initial collateral is not profit.
| Event | Synthetic cash-flow assumption | Cash out | Cash in | Incremental trading P&L |
|---|---|---|---|---|
| entry | synthetic_initial_collateral_posted | 40000 | 0 | 0 |
| interim_price_2.80 | synthetic_variation_payment | 20000 | 0 | -20000 |
| final_price_3.20 | synthetic_variation_receipt | 0 | 40000 | 40000 |
| collateral_return_after_close | synthetic_initial_collateral_returned | 0 | 40000 | 0 |
The peak cash posted in this supplied path is USD 60,000 before fees and physical purchase payments. Actual margin requirements are unknown and are not estimated here. Basis and volume differences remain separate from cash-collateral timing.