In order to better explain the futures basis, we take the agricultural product market as an example. Suppose that the spot price of corn in a certain area is per ton 1000 yuan, while the contract price of corn futures in the same period is per ton 1 100 yuan. In this case, the futures basis is 100 yuan.
Why should there be a futures basis? One possible reason is the relationship between supply and demand. When the market supply is sufficient, the spot price is relatively low, while the futures price is relatively high, which will lead to the emergence of futures basis. Another possible reason is market expectations. If investors expect the price of a commodity to rise in the future, they may buy futures contracts, which will push up the futures price and lead to the emergence of futures basis.
Futures basis rate refers to the ratio of futures basis to spot price. Based on the previous example, if the futures basis is 100 yuan and the spot price is 1000 yuan, the futures basis rate is 100%. Futures basis can be used to measure the relative difference between futures price and spot price.
What is the practical significance of futures basis and futures basis rate? They can provide investors with market information. By observing the fluctuation of futures basis and futures basis rate, investors can understand the market's expectation of future price trends. If the futures basis continues to rise, it may mean that the market's expectations for future price increases are enhanced.
Futures basis and futures basis rate can also be used for arbitrage trading. Arbitrage trading is a strategy to profit from the price difference between different markets. If the futures basis is large, investors can conduct futures contracts and spot transactions at the same time to obtain the difference profit.
Futures basis and futures basis rate can also be used to evaluate market supply and demand. When the futures basis is large, it means that there is sufficient supply or insufficient demand, and investors can adjust their investment strategies according to this information.
Futures basis and futures basis rate are important indicators to measure the difference between futures prices and spot prices. They can not only provide investors with market information, but also be used for arbitrage trading and evaluating the relationship between supply and demand. It is very beneficial for investors to understand and master futures basis and futures basis rate. Investment decisions should be based on comprehensive market analysis and risk assessment to avoid unnecessary losses.