Basis
Glossary · Derivatives
Basis is the gap between a futures contract's price and the spot price of the same asset. Positive basis (futures above spot, contango) signals traders paying a premium for leveraged upside; negative basis (backwardation) signals fear. Annualized, the basis on dated futures is the yield a cash-and-carry trade locks in.
"The gap between futures and spot — when it's fat, the crowd's paying up to be levered long, and that premium is somebody else's yield."
Compute it as (futures − spot) ÷ spot. On dated futures, annualize it: a quarterly trading 2% above spot with 90 days left is roughly 8% annualized, and that premium converges to zero at expiry. On perps the same pressure shows up as funding instead of basis. In hot markets, annualized basis on BTC quarterlies has stretched past 20%; in fear it flips negative and futures trade under spot.
Fat basis is both a signal and a paycheck. Signal: double-digit annualized basis means longs are paying up for exposure — late-cycle behavior, the crowded side. Paycheck: cash-and-carry (buy spot, short the future) locks the spread in with no directional risk, which is exactly what desks do until it compresses. The retail misread is treating the premium as confirmation — "futures are higher, so the market expects up." It expects nothing; it's the cost of everyone else being levered long, and basis blowing out is closer to a warning than an invitation.
Related jargon
Questions
- What is Basis in crypto trading?
- Basis is the gap between a futures contract's price and the spot price of the same asset. Positive basis (futures above spot, contango) signals traders paying a premium for leveraged upside; negative basis (backwardation) signals fear. Annualized, the basis on dated futures is the yield a cash-and-carry trade locks in.
- How would a trader say it?
- The gap between futures and spot — when it's fat, the crowd's paying up to be levered long, and that premium is somebody else's yield.
Part of the Crypto Jargon glossary — every term, decoded the way a trader would say it.
Crypto Jargon
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