Basis can be understood as a dynamic indicator of operational changes between futures prices and spot prices. Through the observation of basis difference, we can find the current market trend, mainly the fundamentals of spot and the expectation of future supply increase or decrease. Generally speaking, basis is an ideal index for the combined analysis of futures and spot.
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.
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.
influencing factor
quality
Because the futures contract stipulates the trading of commodities at the benchmark level, and the quality of actual spot transactions is often inconsistent with the level of futures contracts stipulated by the exchange, this quality difference is included in the basis difference.
region
The commodity delivery place stipulated in the futures contract of the futures exchange is the standard delivery place designated by the exchange, but the actual spot transaction delivery place is often different from the delivery place designated by the exchange. Therefore, the freight difference between the two delivery places has created a certain foundation.
time
Because the delivery time of spot trading is often inconsistent with the delivery month of futures, there is a time difference between the futures price and the spot price. The basis of time influence is mainly reflected in the storage cost, which includes storage cost, insurance premium and interest. In different parts of the spot market, the size of the basis is often fixed in a certain range; Traders can judge the forward spot price by predicting the basis and combining the futures price.