Net Price Received Upon Purchase or Sale
Chapters in this video
- 0:00 Net price: the master formula that covers both sides
- 1:05 Short hedge walkthrough: Fiona the soybean farmer
- 3:22 Long hedge walkthrough: Hank the corn processor
- 5:20 Basis direction: who strong and weak basis helps
- 6:40 Round-turn brokerage commissions as the toll booth
- 7:33 Rapid-fire exam recap
What this video covers
- Why net price equals initial futures price plus ending basis, and how this single formula covers both buyers and sellers
- How a short hedger (seller) adds a futures gain to the cash sale price, and the trap of reporting only the bare cash price or only the futures gain
- How a long hedger (buyer) subtracts a futures gain from the cash purchase price, and why applying the seller's rule here inflates the answer
- What the net price cross-check is: cash price minus ending futures price gives ending basis, which folds back into the master formula
- Why a strong basis is a strong result for the seller, including why a move from 10 under to 5 under is strengthening even though both numbers are negative
- Why brokerage commissions act as a round-turn toll booth that drags on both sides, and where in the calculation sequence to insert them
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 3 course also includes adaptive practice questions and spaced-repetition flashcards, free through the end of 2026.