A futures-overlay review.

1. State the assumptions

The synthetic holding is 10 units purchased at USD 100 per unit. The comparison adds a short futures reference at USD 102, with a multiplier of one and 10 matching units. Basis is defined here as futures reference minus spot. These simplified references are calculation inputs, rather than specifications or prices for a particular exchange contract.

2. Reproduce the calculation

Holding P&L = 10 × (scenario spot − 100). Short-overlay P&L = 10 × (102 − scenario futures reference). Combined P&L is their sum. At equal quantities, combined P&L = 10 × (2 − scenario basis).

3. Interpret what remains

The short overlay offsets the simplified spot-price movement, while a change in basis remains in the combined result. The lower-spot case produces a USD 10 combined gain because basis narrows from 2 to 1. The higher-spot case produces a USD 20 combined loss because basis widens from 2 to 4.

This arithmetic excludes trading costs, funding, fees, execution differences, margin cash flows, contract rounding and settlement differences. A real review replaces these inputs with authorized records and the relevant contract specifications, and models those effects separately.

4. Identify the deliverable

The work product is an assumption register, a reproducible scenario table and an explanation of the residual exposure. It does not place an order. The institution’s authorized decision makers and responsible providers retain the relevant execution, account and collateral responsibilities.