Every lesson in this module has rested on one sentence: the merchant hedges the flat price and keeps the spread. This lesson finally pays that off. It explains the single most important distinction on a physical desk, flat price versus basis, and shows how a trader uses futures to strip the flat price out of a cargo so that only the spread they meant to trade remains. It then introduces the risk that hedging leaves behind, basis risk, which is not a bug but is literally the differential the trader wanted exposure to in the first place. Finally it covers how a book is monitored day to day through mark-to-market and Value at Risk. This is the capstone of the module: it connects the arbitrage spine, the oil and metals differentials, and the margin cost from the finance lesson into one picture of how a physical book is actually run. We build the idea on a plain house-sale hedge, map it to a crude cargo, and work both a hedge and a simple VaR by hand.
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