# Basis Risk for Futures/Options

I am just reading about basis risk. It is being described as risk of the price of the hedging instrument not fluctuating the same as the instrument itself.

I was just wondering, if we bought a future to lock in a price, why would it matter what the price of the future is? Only unless we decide to sell the contract it would matter right?

In short: You have a position of $X$ (thousand) Euros in a bond/basket of stocks and you want to hedge this position by shorting $N$ futures contracts that correlate to these instruments (Bund/Treasury futures or equity index futures).
More often than not, you are not fixing the price at the liquid point and the future can only be used as a dirty hedge to the risk you are attempting to hedge. For example, say I'm a power plant operator attempting to hedge the cost of natural gas to run my plant. This past winter, the price of NG in the northeast blew out and was delivering for \$50-60/MMBtu over NYMEX prices of high \$4, low \\$5/MMBtu. Hedging with NYMEX Henry Hub gas (which delivers near Louisiana) wouldn't really have done you much good.