Basis
The difference between the futures price and the spot price of the same asset.
Formula
\text{Basis} = \text{Futures price} - \text{Spot price}The sign of the basis names the state of the market: positive is contango, negative is backwardation.
How to read the number
Basis packs everything the remaining time is worth into one number: the cost of money, the payouts expected from the asset and the convenience of owning it outright.
When the metric lies
Basis does not have to move smoothly. For a hedger closing early, the result is decided by a jump in the basis rather than by the move in the price itself.
Also known as: futures basis