Basis refers to the difference between the spot price and futures price of a specific commodity at a specific time and place. Its calculation method is the spot price minus the futures price. If the spot price is lower than the futures price, the basis is negative; The spot price is higher than the futures price and the basis is positive.

The connotation of basis is determined by the difference between transportation cost and holding cost between spot market and futures market. In other words, the basis includes two components: time and space, and the transportation cost reflects the time factor between the spot market and the futures market. That is, the holding cost between two different delivery months reflects the holding cost or preservation cost of a commodity from one time period to another, including storage space, interest, insurance premium and so on.

Storage cost is the actual expenditure paid for storing goods, which generally changes with time and region; Interest is the capital cost needed to store goods, and the interest cost will change with the increase of interest rate; Insurance cost is the cost of storing goods for insurance. The basis reflecting the holding cost changes with time; The longer the time, the greater the holding cost. Since the futures contract is only deliverable, the seller should deliver the goods to the buyer after the expiration.

future

Futures generally refer to futures contracts. It is a standardized contract formulated by the futures exchange, which stipulates to deliver a certain number of target commodities at a specific time and place in the future. This topic can be commodities, financial instruments or financial indicators.

election

An option is an option, which refers to the right to buy or sell a certain quantity of a certain commodity at a certain price at a certain time in the future. It is a financial instrument based on futures, which gives the buyer (or holder) the right to buy or sell the underlying assets. Option holders can choose to buy or not to buy, sell or not to sell within the time specified in the option. He can exercise his rights or give them up. The seller of the option has only the obligations stipulated by option contracts.

Reasonable classification of options is helpful to understand option products. Among them, options can be divided into call options and put options according to rights; According to the category, it can be divided into European options and American options; According to the exercise time, it can be divided into European option, American option and Bermuda option.