- Basis trading
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
Basis trading is done when the investor feels that the two securities are mispriced with respect to each other, and that the mispricing will correct itself such that the gain on one side of the
tradewill more than cancel out the loss on the other side of the trade. In the case of such a trade taking place on a security and the futures contract, the trade will be profitable if the purchase price plus the cost of carry is less than the futures price. It is also called cash and carrytrade.
Wikimedia Foundation. 2010.
Look at other dictionaries:
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 … Financial and business terms
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