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Derivatives

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  • September 9, 2021
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Basis Widening

The basis can develop a widening trend when the spot price of an asset/ commodity increases faster than the futures price. For example, CBOT November wheat futures are up 3 cents, while the wheat bid for March delivery is only up 1 cent. As such, the basis has widened 2 cents. In the same token, the basis can widen when the spot price bid decreases more than the futures price does.

A basis widening is the opposite of a basis narrowing.


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