Basis refers to the difference between the spot price of a specific commodity at a specific time and place and the futures price of the commodity in the futures market, that is, basis = spot price-futures price. That is, basis = spot price-futures price.

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.