Can a Trader Use Options to Hedge against Basis Risk?

Yes, a trader can use options, specifically options on the underlying asset, to manage or hedge against basis risk, although it is complex. For example, a trader with a short futures hedge faces risk if the basis strengthens unexpectedly.

They could buy a put option on the spot asset. If the basis strengthens (spot rises relative to futures), the put option's value might increase, offsetting the loss from the imperfect hedge.

This is a form of dynamic hedging against price uncertainty.