DEFINITION of 'Basis Grade'

The minimum accepted standard that a deliverable commodity must meet to be used as the actual of a futures contract. Also known as "par grade" or "contract grade."


Basis grade is important for futures investors for maintaining uniformity, since a given commodity (e.g. oil) may vary drastically in quality. For example, the basis grade of crude futures contracts is set according to certain levels of hydrogen and sulfur in crude oil.

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