Basis refers to the difference between the spot price of a particular commodity at a particular location and the futures price of that commodity.

The basis is calculated by subtracting the futures price from the spot price. Spot price is lower than futures price, basis is negative, spot price is higher than futures price, basis is positive. The smaller the negative value of basis, the stronger the basis and the weaker the basis; Similarly, the smaller the positive basis, the weaker the explanation and the stronger the explanation.