Narrow Basis
A condition found in futures markets in which the spot price of underlying commodities is close to the futures price of the same contract. Investopedia Says:
A narrow basis suggests that the market is efficient, as the supply of and demand for the underlying commodity are in equilibrium.
The spot price and futures price should converge at maturity of the futures contract. If they don't, there is an arbitrage opportunity. Related Terms:
Basis
Commodity
Equilibrium
Forward Rate
Futures Contract
Spot Price
Underlying
Wide Basis |