What you will learn
- Spot and futures prices
- Expiry-specific quotes
- Contango and backwardation
- Basis conventions
Spot and futures prices
Spot and futures quotes must be matched by underlying reference, currency and timestamp before calculating a relationship. A stale spot quote against a fresh futures quote can create an apparent basis that is only a timing mismatch.
Expiry-specific quotes
Different expiries are different contracts. Their prices can differ because delivery timing, financing, availability and market conditions differ. A sequence of expiry prices is a curve, not a forecast that every future spot price must equal today's contract price.
Contango and backwardation
Contango commonly describes deferred prices above nearer prices under a stated comparison; backwardation describes the reverse. Specify which contracts are compared. A label alone does not determine a profitable spread trade.
Basis conventions
Define basis explicitly, for example futures minus spot. Another report may use the opposite sign. Units and sign conventions must be aligned before comparing values or interpreting a widening relationship.
Worked example
Spot is 100 and a matched futures quote is 103. Under futures-minus-spot convention, basis is +3. If another analyst defines spot-minus-futures, the same observations produce −3 without disagreement about the prices.
Try it yourself
Calculate both conventions when spot is 102 and futures is 101. Explain why the convention belongs in the column heading.
Show the worked solution
Futures-minus-spot is −1 and spot-minus-futures is +1. Naming the convention prevents opposite signs from being mistaken for contradictory data.
Apply this to your course project
Build a two-expiry scenario sheet with carry assumptions and roll-cost sensitivity.
Keep the calculation inputs, assumptions and decisions with your work. Practical exercises are self-reviewed; the scored knowledge checks assess the questions shown, not an independent certification of practical competence.