basis trade
Betting that the price gap between a futures contract and its underlying asset will narrow.
A basis trade exploits temporary price differences between a futures contract and the actual asset it represents. A trader might buy the physical asset (like Bitcoin or a stock) while simultaneously selling a futures contract for the same thing, or vice versa. The “basis” is simply the gap between these two prices.
This strategy exists because futures and spot prices sometimes diverge due to supply-demand imbalances, storage costs, or market inefficiencies. Traders use basis trades to profit from this gap converging back to normal levels. For a news reader, basis trades signal that traders see an opportunity for low-risk profit—suggesting either temporary mispricing or that they expect the two prices to sync up soon.
Written once as a plain-English reference, not as advice. Nothing here is a recommendation to buy or sell anything.