Basis
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
The difference between the spot price and the futures price of an asset.
Basis in plain English
There are two prices for the same thing: the 'spot' price is what it costs to buy it right now, and the 'futures' price is what you agree today to pay for it on a set future date. Basis is simply the gap between those two: basis = spot price - futures price. For example, if gold sells for $2,000 today but a contract to buy it in three months is priced at $2,030, the basis is -$30. It matters because that gap tells traders things like storage costs and how eager people are to own the item now versus later.
Learn these first
Related Principles of Finance terms
Principles of Finance practice questions · Principles of Finance flashcards · Principles of Finance study guide