Basis Trading
Basis trading refers to futures trading strategies that focus on the difference between the spot price and the futures contract price of a stock or commodity. This price difference is known as the 'basis.' Traders use the basis to form their strategy, aiming to profit from fluctuations in the price difference. There are two main approaches in basis trading:1. Short the basis: This strategy is used if the trader expects the price difference (basis) to decrease.2. Long the basis: This strategy is used if the trader expects the price difference (basis) to increase.
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