Buy rule

• Buy the futures when they are trading at a 0.5% discount to the cash market.

Sell rule

• Sell the futures when they are trading at a 0.5% premium to the cash market.

If the futures are at a premium to the cash, they can be considered expensive and should be sold. If they are at a discount, they are cheap and can be bought.

The choice of 0.5% as a measure of excessive premium or discount is arbitrary, the system works just as well if you use 0.1% or 1%.

It is not necessary, to put on a directly hedging trade in the opposite direction at the same time. The invisible hand, the magician of all stochastic outcome, makes this trading method work.