Wide Basis


DEFINITION of 'Wide Basis'

A condition found in futures markets in which the spot price of underlying commodities is not close to the futures price of the same contract.


A wide basis suggests that there is an abundant supply of or lack of demand for the underlying deliverable. This is used by investors in futures contracts as a signal to determine what action they should take in the futures market. The spot price and futures price should converge at maturity of the futures contract, otherwise there is an arbitrage opportunity.

  1. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  2. Narrow Basis

    A condition found in futures markets in which the spot price ...
  3. Basis

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

    1. A basic good used in commerce that is interchangeable with ...
  5. Equilibrium

    The state in which market supply and demand balance each other ...
  6. Futures Contract

    A contractual agreement, generally made on the trading floor ...
Related Articles
  1. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  2. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  3. Investing

    Oil: Why Not to Put Faith in Forecasts

    West Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
  4. Economics

    Is the U.S. Economy Ready for Liftoff?

    The Fed continues to delay normalizing rates, citing inflation concerns and “global economic and financial developments” in explaining its rationale.
  5. Mutual Funds & ETFs

    The Risks of Investing in Inverse ETFs

    Discover analyses of the risks inherent to inverse exchange-traded funds (ETFs) that investors must understand before considering an investment in this type of ETF.
  6. Mutual Funds & ETFs

    Top 4 Inverse Equities ETFs

    Explore analysis of some of the most popular inverse and leveraged-inverse ETFs that track equity indexes, and learn about the suitability of these ETFs.
  7. Investing

    2 Sectors to Explore When Rates Rise

    While the market selloff and declining inflation expectations have lowered the probability of a Fed rate rise, U.S. economic data still supports it.
  8. Investing

    Ideas for Your Bond Portfolio When Rates Rise

    It has been nearly 10 years since the Fed last raised interest rates, and though the central bank didn’t hike rates this month, they look to be coming.
  9. Investing News

    Friday Intel: PPI and The Fed

    Markets were relatively quiet overnight with U.S. stock market futures pointing to a modestly lower open, down around 0.35%.
  10. Mutual Funds & ETFs

    ETF Analysis: United States Gasoline Fund

    Learn about the United States Gasoline Fund, the characteristics of the exchange-traded fund, and the suitability and recommendations of it.
  1. 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 >>
  2. 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 >>
  3. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  6. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  2. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  3. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  4. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Capitalized Cost

    An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!