Why Is the Basis Expected to Approach Zero as the Futures Contract Nears Expiration?

The basis is expected to approach zero due to the principle of convergence. As the contract nears expiration, the opportunity for arbitrage diminishes, and the financial difference between holding the physical asset (spot) and the futures contract becomes negligible.

At expiration, the futures price is determined by the final settlement price, which is based on the spot price, forcing the two prices to be equal.