Basis of Futures
Basis can be defined as the difference between the spot price of a given cash market asset and the price of its related futures contract. There will be a different basis for each delivery month for each contract. Usually, basis is defined as cash price minus futures price, however, the alternative definition, future price minus cash, is also used. A basis trade profits from the closing of an unwarranted gap between the futures contract and the associated cash market instrument.
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