How Can a Hedger Attempt to Minimize the Impact of Basis Risk?

A hedger can minimize basis risk by selecting the futures contract whose underlying asset and delivery month most closely match their spot exposure. They can also use a cross-hedge, though this increases risk.

The most effective method is to closely monitor the basis and adjust the hedge ratio or the contract's expiration date. For financial assets, choosing a contract with a highly correlated underlying asset is key.