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Long The Basis

What does Long The Basis mean?

Trading situation in which a cash long position is hedged by a futures or forward short position. In Long the basis strategy, a trader or investor who has bought the spot commodity, also hedges with a sale of futures.

Futures Knowledge Explains Long The Basis

In futures, long the basis is to take a long position on a commodity and a short position on a futures contract on the same commodity. The trader who is long the basis in a commodity protects against the possible increase in its price. This allows the investor to lock in the price of the commodity at the time when delivery of the commodity is to take place. Long the basis is used an investing strategy when the investor believes that the price of the commodity will soon decline.

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