Short The Basis

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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. Cash Price

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

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

    1. The variation between the spot price of a deliverable commodity ...
  4. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  5. Futures Contract

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

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