What Is a “Negative Basis” and What Market Condition Does It Reflect?

A negative basis occurs when the spot price is lower than the futures price (Spot Price – Futures Price < 0). This condition is known as contango.

A negative basis reflects the positive cost of carry, meaning the cost of holding the asset until the future date is positive. It is the normal market structure for assets that have storage and financing costs.

A large negative basis signals a potential cash-and-carry arbitrage opportunity.