Annualized Basis



The basis refers to the difference between the spot and the (multiple) prices of the futures contracts for a financial instrument. In the case of the futures basis, it measures the effective annual interest rate to go long a future versus holding spot. Depending on whether a futures contract is dated or perpetual, the basis can guide us in determining the relative cost someone incurs or earns by trading a futures contracts instead of buying or selling spot contracts.

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