A large basis indicates that futures are in a positive market, but whether to be long or short depends on the actual market.

1. If the supply in the forward market is insufficient and the demand is relatively strong, the contract price will increase more than the forward monthly contract, or the contract price will decrease less than the forward monthly contract. You can do more in the near contract, short in the far contract, and establish the same warehouse arbitrage operation.

2. Firm arbitrage When the absolute value of the spread is greater than the cost of the position, the opportunity of firm arbitrage appears in the positive market. At this point, you can make long contracts in recent months and establish short contracts with the same position in distant months. Receipt of warehouse receipts in recent months, and delivery and liquidation of warehouse receipts in distant months, can obtain risk-free income.

3. Active bear market arbitrage If there is an oversupply in the market and the demand is relatively insufficient, then the decline of the contract price in recent months will be greater than that of the forward contract price, or the increase of the contract price in recent months will be less than that of the forward contract price. Or, at this time, you can carry out arbitrage operation, short the contract in the near month, and establish a long contract with the same position in the far month.

4. First understand what the basis is: basis = spot price-futures price. The futures price deviates greatly from the spot price when it enters the market, and the basis regression trading strategy is based on this.

I. Basic differences

1. basis is the difference between the spot price and the 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.

2. 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.

3. The basis reflecting the holding cost changes with time; The longer the time, the greater the holding cost. Because the futures contract is only crosscutting, the seller should hand over the goods to the buyer after the expiration.

Second, the definition

1. basis refers to the difference between the spot price of the hedged asset and the price of the futures contract used for hedging. Since both the futures price and the spot price will fluctuate, the basis will also fluctuate during the validity period of the futures contract. The uncertainty of basis is called basis risk. The key to reduce basis risk and realize hedging is to choose a highly matched hedging futures contract.

2. Basis risk is directly related to the basis at the time of hedging liquidation. When investors hold spot and short futures positions for hedging, the basis on the hedging closing date will expand and investors will make profits; On the contrary, when an investor will buy an asset in the future and hold a long future positions for hedging, and the basis on the hedging settlement date will expand, the investor will lose money.