1. Basis theory

Basic difference is a very important concept in futures trading.

(1) Components of futures prices

1. Commodity production costs;

2. Futures transaction costs: including transaction fees and capital costs;

p>

3. Futures commodity circulation costs: including commodity transportation fees and commodity storage fees;

4. Expected profits: including social average investment profits and risk profits of futures trading;

< p>(2) Forward market and reverse market

For the same commodity, there are two basic relationships between the spot price and the futures price. Under normal circumstances, the futures price is higher than the spot price (or the recent month contract price is lower than the forward contract price), which is called a positive market; under special market conditions, the spot price is higher than the futures price (or the recent month contract price is higher than the forward contract price). in the forward month contract price), it is called an inverse market.

(3) Basis

The basis is the difference between the spot price of a commodity at a specific location and the price of a specific futures contract for the same commodity. Basis = spot price - futures price. Changes in basis are subject to holding charges. Eventually, due to the convergence of spot prices and futures prices, the basis falls to zero in the delivery month of the futures contract. The main determinant of basis is the supply and demand relationship of commodities in the market. For primary products, especially agricultural products, the basis difference is not only affected by general supply and demand factors, but also to a large extent by seasonal factors.

The basis is an important indicator of the relationship between futures prices and spot prices. Basis is the basis for successful hedging. The effect of hedging is mainly determined by changes in basis; basis is the yardstick for price discovery; basis is very important for arbitrage transactions between futures and spot.