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.
Read more about this topic: Basis Trading
Famous quotes containing the words basis of, basis and/or futures:
“Had we not loved ourselves at all, we could never have been obliged to love anything. So that self-love is the basis of all love.”
—Thomas Traherne (1636–1674)
“Self-alienation is the source of all degradation as well as, on the contrary, the basis of all true elevation. The first step will be a look inward, an isolating contemplation of our self. Whoever remains standing here proceeds only halfway. The second step must be an active look outward, an autonomous, determined observation of the outer world.”
—Novalis [Friedrich Von Hardenberg] (1772–1801)
“One of the things that is most striking about the young generation is that they never talk about their own futures, there are no futures for this generation, not any of them and so naturally they never think of them. It is very striking, they do not live in the present they just live, as well as they can, and they do not plan. It is extraordinary that whole populations have no projects for a future, none at all.”
—Gertrude Stein (1874–1946)