Basis is defined as the difference between which two prices?

Basis is defined as the difference between which two prices?

• A. Cash price minus futures price
• B. Futures price minus cash price
• C. Cash price plus futures price
• D. Futures price minus costs

Answer: (A)

Basis is the difference between the cash price (spot price) and the futures price for the same commodity and delivery month. It is calculated as cash price minus futures price. This tells you how the current cash market compares to what the market expects for future delivery. A positive basis means cash is trading above the futures price, while a negative basis means cash is below the futures price. The other options don’t fit because they either reverse the order (futures minus cash), add the prices together, or use costs instead of the futures price in the difference.

Basis is the difference between the cash price (spot price) and the futures price for the same commodity and delivery month. It is calculated as cash price minus futures price. This tells you how the current cash market compares to what the market expects for future delivery. A positive basis means cash is trading above the futures price, while a negative basis means cash is below the futures price. The other options don’t fit because they either reverse the order (futures minus cash), add the prices together, or use costs instead of the futures price in the difference.