What is Futures Basis?
The futures basis is the difference between the futures price and the spot price of the underlying asset: Basis = Futures Price − Spot Price. When basis is positive, the market is in contango (futures above spot); when negative, it is in backwardation (futures below spot). Basis reflects carrying costs, convenience yield, and supply and demand expectations until expiration.
How to Use This Futures Basis Calculator
- 1
Enter futures and spot prices
Enter the current futures contract price and the spot price of the underlying (e.g. commodity, index).
- 2
Set time to maturity and rates
Enter days to expiration, the risk-free rate (e.g. 5 for 5% per year), and the cost of carry (storage, insurance; use a negative value for convenience yield).
- 3
Read basis and theoretical price
The calculator shows the basis (Futures − Spot) and the theoretical futures price from the cost-of-carry model. Compare the market futures price to the theoretical to assess fair value.
Why Use the Cost-of-Carry Model?
The theoretical futures price is often written as F = S × e^((r − c) × T), where S is spot, r is the risk-free rate, c is the cost of carry (or net of convenience yield), and T is time to maturity in years. This cost-of-carry model assumes no arbitrage: holding the physical asset and financing it should cost the same as holding the futures. Deviations from this theoretical price can signal arbitrage opportunities or market stress.
Contango vs. Backwardation
In contango, futures trade above spot—typical when storage and financing costs exceed any convenience yield. In backwardation, futures trade below spot—common when there is strong demand for the physical asset (high convenience yield) or supply is tight. The basis and its term structure are used in commodity and derivatives trading to assess fair value and roll costs.