Booking the Basis

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DEFINITION

An arrangement made between a buyer and seller giving either party the ability, at some future date, to determine the cash price of the forward sales agreement. Once the basis of a futures contract is booked, it is applied to the current futures price and is maintained for the duration of the contract. Also known as "deferred pricing."

INVESTOPEDIA EXPLAINS

Booking the basis is used to calculate what the price will be at some time in the future. First the parties agree upon the formula or basis. Then, at a later date, the price is found by applying the previously agreed upon basis to the current futures quotation.


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