Short The Basis

AAA

DEFINITION of 'Short The Basis'

A futures strategy involving the purchase of a futures position to hedge against a future commitment to deliver the underlying commodity.

INVESTOPEDIA EXPLAINS 'Short The Basis'

Opposite to a short hedge, shorting the basis implies that the investor will be taking a short position in the commodity and a long position in the futures contract. This strategy is used to hedge a position by locking in a future spot or cash price and thereby removing the uncertainty of rising prices.

RELATED TERMS
  1. Delivery

    The action by which an underlying commodity, security, cash value, ...
  2. Spot Price

    The current price at which a particular security can be bought ...
  3. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  4. Cash Price

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

    1. A basic good used in commerce that is interchangeable with ...
  6. Basis

    1. The variation between the spot price of a deliverable commodity ...
Related Articles
  1. Fueling Futures In The Energy Market
    Options & Futures

    Fueling Futures In The Energy Market

  2. Adding Alpha Without Adding Risk
    Options & Futures

    Adding Alpha Without Adding Risk

  3. Interpreting Volume For The Futures ...
    Options & Futures

    Interpreting Volume For The Futures ...

  4. The Foreign Exchange Interbank Market ...
    Forex Education

    The Foreign Exchange Interbank Market ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center