Basis Grade

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DEFINITION of 'Basis Grade'

The minimum accepted standard that a deliverable commodity must meet to be used as the actual of a futures contract. Also known as "par grade" or "contract grade."

BREAKING DOWN 'Basis Grade'

Basis grade is important for futures investors for maintaining uniformity, since a given commodity (e.g. oil) may vary drastically in quality. For example, the basis grade of crude futures contracts is set according to certain levels of hydrogen and sulfur in crude oil.

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RELATED FAQS
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    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
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    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
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    Domestic energy investors should track the reserve inventory of crude oil for the United States, which is released in a weekly ... Read Full Answer >>
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    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
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