The "O" futures are for Odd months, not even ones.
Thanks for fixing that for me
Then this is akin to saying that there will be approximately 5.47 difficulty adjustments between now and 18 September 2013 (25% growth per period = 7.5 days per period = 41 days (til 9/18) / 7.5days and that difficulty on 9/18/2013 will be approximately 114,113,665 as of the fifth of those adjustments (do I have you right? difficulty will increase by 25% each cycle?).
Based on this model, you should definitely buy the futures contracts at any price up to BTC0.01, as they will automatically settle at BTC0.01 per contract early (on or around 14 September 2013) - if I have your model correct - both to hedge your mining investment and also because your model says there's a solid 10-20% ROI available on the market price of these futures (currently in the 0.008 - 0.009 range)
However, the last difficulty change was on August 3 making the 7.5 day, 25% increase cycle finish on September 17, at a difficulty of 142,642,083. But, I think I understand....
If I purchase the future at .009 and it settles at .008 - the .001 represents the COST to me to protect my investment, right?
If I purchase the future at .009 and it settles at .01 - the .001 represents protection benefit of the hedge, do I have that correct?
If so, then assume I've purchase 500 Gh/s of mining equipment I wish to hedge. How many futures should I purchase?
EDIT:
I think to answer to above question I need to determine what I think the maximum increase in difficulty is I'm hedging against. So, let's say it's 30%.
Therefore, network hash rate (Gh/s) at 25% = 1021072;
network hash rate at 30% = 1291982;
Expected per day btc mining revenue at 25% = 1.762853158 (500/1021072*144*25)
Expected per day btc mining revenue at 30% = 1.393208265 (500/1291982*144*25)
Expected loss per day = 0.369644894, or for 30 days = ~11.08 btc.
So, I need to hedge a position that will result in 11.08 btc, if difficulty is above 142,642,083