You hold an inventory in a commodity and also a short futures position in the same commodity. Currently, your inventory has a market value in excess of its cost. In essence, you have - by taking the futures position. torfeited any potential future gains from price increases in exchange for eliminating your downside risk increased both your potential gains and your potential losses Increased your potential gains from price increases while limiting your potential losses from price decreases locked in your maximum loss while maintaining your opportunity for additional gains eliminated your current gain on your inventory in exchange for eliminating any potential future loss