Basis
The gap between the futures price and the spot price — and how it collapses to zero by expiry.
Definition
Basis is the difference between the price of a futures contract and the spot price of its underlying. A positive basis (future above spot) reflects contango, while a negative basis (future below spot) reflects backwardation. It is driven mostly by the cost of carry and any expected dividends.
Why it matters
Basis is the cleanest read on how the futures market is pricing carry and positioning relative to cash. Traders watch it to gauge financing costs, spot dividend effects, and time arbitrage opportunities. Because basis converges to zero at expiry, it also tells you the drift a futures position will experience if spot stays put — a structural cost or benefit independent of direction.
Formula
Basis = Futures price − Spot price. It is sometimes quoted the other way (Spot − Futures), so always check the sign convention before comparing values.
Example
If an index spot is at 22,000 and the near-month future trades at 22,070, the basis is +70 points. Two weeks later, with spot unchanged at 22,000 and expiry near, the future might trade at 22,015 — a basis of just +15. The 55-point shrink is the basis converging as carry runs off.
See it live
Watch spot and futures move side by side on TradePulse and read the live basis at a glance.