What Is Basis?
The basis is an indicator that measures the difference between the latest price and the index price of a futures contract at a specific time, which can be quantified into a rate:
Basis rate = (Contract latest price - Index price) / Index price. This reflects the deviation between the latest price and the index price of a futures contract at a specific moment.
Causes and Impacts of Wide Basis
1. Causes of a wide basis
(1) Volatile market: Sharp swings in market sentiment can lead to significant shifts in buying/selling dynamics, rapidly widening the basis in the short term.、
(2) Insufficient liquidity: Markets with low liquidity may experience exaggerated price movements, leading to unexpected widening of the basis.
(3) External factors: News headlines, policy changes, or market events (e.g., technical errors, regulatory developments) can lead to decreased trading activity or significant price fluctuations, which in turn affect the basis.
2. Impacts of a wide basis
The mark price is calculated based on the index price, so changes in the basis reflect the widening or narrowing of the gap between the latest price and the mark price of a futures contract. A widening basis signals a growing gap between these prices. Since the liquidation price is based on the mark price, traders face higher risks of forced liquidation when the basis widens. To mitigate this risk, traders should monitor basis fluctuations closely.
Note: If the basis exceeds a preset threshold, a risk warning will appear on the trading page. Traders should immediately adjust leverage levels and add more margins to manage their positions.
🔗 Learn more: What is Mark Price
How to View Basis Rate in Futures Market
- Web: CoinEx Navigator > Futures > Market Info > Index Price - Basis Rate
- App: CoinEx App > Futures > Top Right Corner (...) > Market Info > Index Price - Basis Rate