What is the price relationship between spot and futures?
Spot price is the basis of futures price. Although futures trading is mainly based on contract trading, it is always based on delivery. Therefore, the spot price of commodities determines the futures price of commodities. The difference between spot price and futures price is called basis difference, which is calculated by subtracting futures price from spot price. As the maturity date of futures approaches, futures will continue to be converted into spot, and the basis difference between them will become smaller and smaller.
There can be arbitrage between futures and spot markets. When there is a price difference between the futures market and the spot market, which is greater than or less than the various costs of delivery, we can use the price difference between the two markets to buy undervalued assets and sell overvalued assets at the same time, and then close the position at the same time when the basis returns to the normal range.