What is basis?Basis
Spot price − futures price; it converges toward zero by expiration.
Learn “basis” in an animated lesson
- Futures BasicsBasis and Convergence at Expiry
The futures price isn't the same as the spot price, and the gap between them is the basis. As expiry approaches, the futures price moves toward spot.
- Futures BasicsHedgers and Speculators
Selling the same wheat future, a farmer with wheat is "buying insurance" while a trader without wheat is "placing a bet". The basis decides how precisely a hedge locks in the price.
Related terms
See how “basis” works for yourself with an animation you can drag and play.
Go to “Basis and Convergence at Expiry”