Theoretically, the futures price is the market's forecast of the future spot market price, and there is a close relationship between them. Due to the similarity of influencing factors, futures prices and spot prices often show a relationship of ups and downs; However, the influencing factors are not exactly the same, so the changes of the two are not completely consistent, and the relationship between spot price and futures price can be described by basis. Basis is the difference between the spot price of a commodity in a specific place and the price of a specific futures contract of the same commodity, that is, basis = spot price-futures price. The basis is sometimes positive (called the inverse market) and sometimes negative (called the positive market). Therefore, the basis is a dynamic indicator of the actual operation change between the futures price and the spot price.

The change of basis directly affects the effect of hedging. From the principle of hedging, it is not difficult to see that hedging actually replaces the risk of price fluctuation in the spot market with basis risk. Therefore, in theory, if the basis remains unchanged at the beginning and end of hedging, it is possible to achieve complete hedging. Therefore, the hedger should pay close attention to the change of basis and choose favorable opportunity to complete the transaction.

At the same time, the fluctuation of basis is relatively stable than that of futures price and spot price, which provides favorable conditions for hedging transactions; Moreover, the change of basis is mainly controlled by holding cost, which is much more convenient than directly observing the change of futures price or spot price.

When the hedger fails to find a futures contract that completely matches the spot position in terms of variety, duration and quantity, when choosing a substitute contract for hedging operation, the basis risk arises because the cash flow cannot be completely locked.