What Is the Theoretical Minimum Value of the Basis?

The theoretical minimum value of the basis (Spot Price – Futures Price) is typically the negative of the maximum possible cost of carry. In a well-functioning market, the basis cannot become arbitrarily negative because arbitrageurs would execute a reverse cash and carry trade.

They would borrow money, sell the spot asset, and buy the futures contract, locking in a profit. This activity establishes a lower bound for the futures price and thus a minimum for the basis.