Basis

The numerical difference between the futures price and the current spot price of an asset, calculated as futures price minus spot price. A positive basis indicates that futures are trading above the spot price (a condition known as contango), while a negative basis means futures are below the spot price (known as backwardation). Basis is a critical concept for hedgers and arbitrageurs, as changes in basis over time affect the profitability of hedging strategies and futures roll costs.