If the current cash price is 90 and the futures price for the same delivery month is 92, the basis (cash minus futures) is:

If the current cash price is 90 and the futures price for the same delivery month is 92, the basis (cash minus futures) is:

• A. -2
• B. 2
• C. 0
• D. -4

Answer: (A)

Basis is found by subtracting the futures price from the cash price for the same delivery month. Here, 90 minus 92 equals -2. A negative basis means the futures price is higher than the cash price, indicating contango. The other numbers would come from using a different subtraction or different price values, e.g., reversing the order (futures minus cash) would give 2, or using equal prices would give 0.

Basis is found by subtracting the futures price from the cash price for the same delivery month. Here, 90 minus 92 equals -2. A negative basis means the futures price is higher than the cash price, indicating contango. The other numbers would come from using a different subtraction or different price values, e.g., reversing the order (futures minus cash) would give 2, or using equal prices would give 0.