Futures basis = futures price-spot index price
If the spot price is lower than the futures price, the basis is negative, and the forward futures price is higher than the recent futures price. This situation is called "futures premium" or "spot premium", and the part where the forward futures price exceeds the recent futures price is called "futures premium rate". If the forward futures price is lower than the recent futures price and the spot price is higher than the futures price, the basis is positive, which is called "futures discount" or "spot premium". The part where the forward futures price is lower than the recent futures price is called "futures discount rate".
Premium refers to the difference between standard delivery and alternative delivery approved by the exchange. This premium standard is generally determined by the exchange. Due to the arbitrariness of premium standard adjustment and the uncertainty of standard delivery and alternative delivery, exchanges often change it, resulting in too many artificial uncertainties in futures trading, which makes it difficult for traders to solve this problem.
Investors should pay close attention to the changes of premium and discount in order to trade at the most favorable premium and discount level. If a trader knows nothing about the general movement pattern of premium level of a particular commodity, he can never make a correct judgment on whether to accept or give up a spot or futures price, whether or when to hedge and in which delivery month, and when to withdraw from the futures market. Therefore, attaching importance to the study of premium and discount and perfecting the premium and discount system are beneficial to the healthy development of investors and the whole futures market.
Futures premium means that the futures market price is higher than the spot market price, while stock index futures premium means that the spot market price is higher than the futures market price, which is a normal phenomenon in the futures market. Theoretically, futures and spot prices are the same, but because the futures market is a secondary market, the price changes more, which also produces premium and discount.