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Basis

Basis is the difference between the futures price & the current cash price of the same commodity. It is calculated as the cash price minus the futures price. Changes in basis impact the effectiveness of futures as a hedging tool, typically using the nearest contract month.

Related Terms

Balanced Mutual Fund 

A Balanced Mutual Fund invests in a mix of equity and debt assets, aiming to generate returns from both. It is designed for risk-averse investors seeking higher returns, providing a diversified investment option that balances potential growth with relative safety.

Back End Load

A Back End Load or Exit Load is a commission or fee charged when an investor sells or exits a mutual fund. This fee is not applied by all fund houses and represents an additional cost that investors need to bear.

Average P/E Ratio

The P/E Ratio or Price/Earnings ratio is calculated by dividing the current market price of a share by its earnings per share. A higher P/E ratio reflects greater investor willingness to pay, while losses result in a P/E ratio of zero or nonexistent. 

Basis of Allotment

Basis Allotment is the process of allocating shares to shareholders, typically seen in an IPO. Shares are distributed based on prior agreements and specific conditions that must be met before issuance, ensuring an orderly allocation among investors participating in the offering.

Basket Trades

Basket Trades involve buying or selling a group of securities simultaneously. Typically used by institutional investors, this strategy allows traders to execute multiple trades at once, often for managing portfolios or replicating an index, helping to save time and reduce transaction costs.

Bid and Ask

The Bid is the highest price a buyer is willing to pay for a security, while the Ask is the lowest price a seller is willing to accept. The difference between the Bid and Ask prices is called the spread, influencing trading and liquidity.

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