basis trading

basis trading
Basis trading is the simultaneous entry into both a cash position for a particular product and an equal and opposite futures position on the same underlying. A basis trader looks to profit from a change in the relationship between the cash price and the future, i.e. from a change in the basis. Dresdner Kleinwort Wasserstein financial glossary
————
An arbitrage position typically comprising a long cash position together with a short position in its respective futures contract, whereby the cash price plus the cost of carry of the underlying position is lower than the futures price. Arbitrageurs will therefore buy cash and 'carry' to the futures date for delivery into the futures contract. It is assumed that the cash position is financed in the overnight repo market. By convention, buying the basis is to buy cash bonds and sell futures, and selling the basis is to sell cash bonds and buy futures. LIFFE

* * *

   ► See Cash and Carry Trade.

Financial and business terms. 2012.

Игры ⚽ Поможем сделать НИР

Look at other dictionaries:

  • Basis trading — is an arbitrage strategy usually consisting of the purchase of a particular security and the sale of a similar security (often the purchase of a security and the sale of a corresponding futures contract). Basis trading is done when the investor… …   Wikipedia

  • Basis Trading Facility — ( BTF) A system operated on the LIFFE market for certain bond futures which allows for the simultaneous execution of cash and futures trades ( basis trades) without entering the futures pit. Dresdner Kleinwort Wasserstein financial glossary (… …   Financial and business terms

  • basis risk — The risk to a holder of financial instruments that a change in prevailing interest rates will not affect the prices of or yields on similar instruments in exactly equal amounts. For example, an increase in prevailing interest rates might raise 3… …   Financial and business terms

  • Trading card — Various trading cards A baseball card () is a small card, usually made out of paperboard or thick paper, which usually contains an image of a certain person, place or thing (fictional or real) and a short description of the picture, along with… …   Wikipedia

  • Trading Places — This article is about the 1983 comedy film. For other uses, see Trading Places (disambiguation). Trading Places The theatrical release poster, which calls the film Some very funny business. The slogan reads, They re not just getting rich...they… …   Wikipedia

  • Trading zones — The metaphor of a trading zone is being applied to collaborations in science and technology. The basis of the metaphor is anthropological studies of how different cultures are able to exchange goods, despite differences in language and culture.… …   Wikipedia

  • Trading Halt — A temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for purely regulatory reasons. During a… …   Investment dictionary

  • Basis swap — A basis swap is an interest rate swap which involves the exchange of two floating rate financial instruments. A floating floating interest rate swap under which the floating rate payments is referenced to different bases. Usage of basis swaps for …   Wikipedia

  • trading halt — When trading of a stock, bond, option or futures contract is stopped by an exchange while news is being broadcast about the security. Bloomberg Financial Dictionary See: suspended trading. Bloomberg Financial Dictionary The susp …   Financial and business terms

  • basis of assessment — The basis upon which personal income or business profits are assessed in the UK for each fiscal year. The individual rules for each income tax schedule identify the profits or income to be assessed in that year. These rules are complex and the… …   Accounting dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”