[Verse 1] When you buy a futures contract today The price might seem so far away From what the asset's trading for right now But time will show you exactly how As expiration date draws near Something magical will appear The gap between them starts to fade That's convergence being made [Chorus] Futures meet the spot at expiration No more price separation Convergence is the rule, basis shrinks to zero That's the hedging hero When futures meet the spot at expiration Perfect price coordination Convergence is the rule, basis shrinks to zero That's what makes it clear-o [Verse 2] The basis is the difference you can see Spot price minus futures, that's the key When basis changes, that's your risk right there Even when you hedge with careful care If basis widens unexpectedly Your hedge won't work so perfectly The profits that you thought you'd make Could vanish for the basis sake [Chorus] Futures meet the spot at expiration No more price separation Convergence is the rule, basis shrinks to zero That's the hedging hero When futures meet the spot at expiration Perfect price coordination Convergence is the rule, basis shrinks to zero That's what makes it clear-o [Bridge] Strengthen or weaken, the basis will move That's the risk you need to prove Cross hedging makes it even worse Different assets, different curse But at expiration, convergence wins That's where the magic begins [Verse 3] So when you hedge your portfolio Remember basis risk will flow The closer to expiration date The smaller risks you'll calculate Arbitrage will force the prices tight Making convergence work just right Storage costs and carry trades Keep the pricing rules obeyed [Chorus] Futures meet the spot at expiration No more price separation Convergence is the rule, basis shrinks to zero That's the hedging hero When futures meet the spot at expiration Perfect price coordination Convergence is the rule, basis shrinks to zero That's what makes it clear-o [Outro] Convergence and basis risk Every hedger needs to know this Plan your trades and time them right Convergence brings the perfect sight
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