Short the Basis

Short the Basis

A futures strategy involving the purchase of a futures position to hedge against a future commitment to deliver the underlying commodity.

Notes:

Opposite to a short hedge, shorting the basis implies that the investor will be taking a short position in the commodity and a long position in the futures contract. This strategy is used to hedge a position by locking in a future spot or cash price and thereby removing the uncertainty of rising prices.

See also: Basis, Cash Price, Commodity, Delivery, Futures Contract, Hedge, Short, Spot Price