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How Can a Hedger Use Futures Contracts to Mitigate Basis Risk near Options Expiration?

A hedger can use futures contracts to "lock in" the value of their underlying asset position as the option approaches expiration. By simultaneously closing the options position and opening an equivalent futures position, the hedger replaces the volatile options delta with the stable delta of the futures contract, effectively reducing the basis risk associated with the option's final settlement.

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