[Olga]

The rule is that the spread is divided by not the term of the future, but by the term from “now” 15 of December till expire 31 of March, which is 3,5 months. And 0,5 represents the time from exercise of the future 15 of March to the expire which is 0,5 months. So the idea is that basis reduces by 0,21/3,5 = 0.06 each month, and by 15 of March it should be higher than spot rate by 0.5*0.006 = 0.03.

[Olga]

Thank you. I meant, I know the formula, but I do not see logic in 2/3. If we exercise the future contracts in 2 months, we’ll get 5,3 * 125,000 = 662,500 euros hedged, right? And we needed a million.

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