Buy the asset in the cash market, sell the futures against it, and hold both until the basis converges at delivery. The return is fixed the moment the trade goes on: the futures premium over spot, less financing, storage and insurance for the days in between. This is the mechanism that keeps futures priced near fair value, so the mispricings it feeds on are small and execution costs decide whether anything is left. The real risk lives in the carry assumptions and in the cash leg rather than in the price. Set spot, the futures price and the days to delivery here and read the implied carry yield.
The full Futures Basis Trade guide, worked example and FAQs →
Two legs in two different markets — a cash purchase and a futures sale — so this is the one structure here that is not a single options or futures ticket but a coordinated pair across a cash desk and a futures account. Financing the cash leg is usually the binding constraint in practice, not the futures margin, and the rate used to compute the carry should be the actual funding rate available, not a benchmark rate that may not be accessible at the size being traded.
The position is sized by how much cash and storage capacity are actually available to carry to delivery, not by how attractive the basis looks on a screen — a basis trade that cannot be carried to convergence is a directional bet wearing an arbitrage's clothes. Financing costs are typically a floating rate tied to the broker's or bank's own funding cost, and a rate that rises after entry shrinks a locked-in-looking profit in real time even though the price risk is fully hedged. This is largely an institutional trade in practice, for exactly that reason — the operational and funding capacity is the actual barrier to entry, not the arithmetic.
Common mistake. The common mistake is entering the trade on an attractive basis without confirming the storage and funding capacity to actually carry it to convergence, turning a hedged arbitrage into an unhedged directional bet.
| # | Action | Instrument | Strike |
|---|---|---|---|
| 1 | Buy | Gold (spot) | 2650 |
| 2 | Sell | Gold future | 2704 |
| Financing rate (annualised) | Implied carry profit |
|---|---|
| 2.6% | $19.55 |
| 3.1% | $12.92 |
| 3.6% | $6.30 |
| 4.1% | -$0.33 |
| 4.6% | -$6.95 |
| Strategy | Market view | Opened for | Legs vs. this one |
|---|---|---|---|
| Futures Outright | Directional — leveraged, linear | Margin | -1 |
| Futures Calendar Spread | Term structure — non-directional | Margin | same |
| Futures Spread | Relative value — non-directional | Margin | same |
| Covered Futures Call | Neutral to mildly bullish — futures income | Margin | same |