Hedging strategies-reduce basis risk

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gtamfreak

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I don’t understand why one has to match the maturity of the future contract to the desired holding period. Also, I don’t understand what schweser says about longer maturity future contracts- when the future contract is longer, the investor must reverse at the end of the holding period at the existing future price.
What do they mean by ‘reverse at the end of the holding period’? Can someone please explain? Thanks.
 
there are two ways to exit or get out of the obligations in a futures contract . one is for short to deliver and long to pay , 2nd is for 1 party or both to execute an opposite contract , i.e. go long same number of contracts when they’re short , or go short same number of contracts when theyr’e long . This nullifies the obligations under the contract , and in fact the margin account can be closed and the funds withdrawn at that point .
Schweser calls it reversing , and this is not a commonly used term , but the picture should be very clear ( even elementary )
 
there are two ways to exit or get out of the obligations in a futures contract . one is for short to deliver and long to pay , 2nd is for 1 party or both to execute an opposite contract , i.e. go long same number of contracts when they’re short , or go short same number of contracts when theyr’e long . This nullifies the obligations under the contract , and in fact the margin account can be closed and the funds withdrawn at that point .
Schweser calls it reversing , and this is not a commonly used term , but the picture should be very clear ( even elementary )
 
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