Price Basing


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.

BREAKING DOWN '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.

  1. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  3. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  4. Cash Price

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

    In futures trading, the cash commodity is delivered for payments. ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
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  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
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  5. What does a futures contract cost?

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