Price Basing

AAA

DEFINITION of 'Price Basing'

A method of pricing commercial commodity transactions that bases these prices on related futures contract prices. This method is used by commodity producers, processors, merchants and consumers.

INVESTOPEDIA EXPLAINS 'Price Basing'

Using futures contracts with similar underlying commodities as a pricing benchmark for commercial commodity transactions allows smaller participants in the commercial market for commodities to factor-in different variables. Price basing permits these individuals and companies to reach a more informed price without the related cost of research.

RELATED TERMS
  1. Cash Commodity

    In futures trading, the cash commodity is delivered for payments. ...
  2. Cash Price

    The actual amount of money that is exchanged when commodities ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  4. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  5. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
Related Articles
  1. Active Trading

    How Companies Use Derivatives To Hedge ...

  2. Insurance

    Futures Fundamentals

  3. First time stock investors may ask, is there any way to buy insurance on stocks to prevent losses?
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your ...

  4. Investors can use derivative securities to effectively buy insurance on their individual holdings or on their portfolio as a whole.
    Options & Futures

    Can You Buy Stock Insurace? 3 Strategies ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center