Basis is the price difference between a derivative and a specified reference market, commonly a futures price compared with spot. It describes relative pricing, not the absolute direction of either market. The contract maturity, reference asset and observation time must match the comparison being made.
State which price is subtracted
Sign conventions differ. Some crypto-market discussions use futures minus spot, while many commodity hedging markets use cash minus futures. A positive number can therefore describe opposite situations in different sources.
Using futures minus spot, a hypothetical future at 102 USDT and spot at 100 USDT have a basis of +2 USDT per underlying unit. Dividing by the stated spot price gives a 2% premium. Under the opposite subtraction convention, the monetary basis is −2 USDT. Neither figure is automatically an annual return.
Why the difference matters
Financing, maturity, liquidity and supply-demand conditions can affect basis. A hedge can reduce directional exposure while still gaining or losing because its two legs move differently; this is basis risk.
A quoted premium alone does not guarantee an arbitrage profit. Execution, borrowing, collateral and settlement-reference differences can change the outcome. For dated contracts, convergence concerns the contract’s specified settlement reference, which may differ from a trader’s chosen spot venue. A perpetual’s ongoing basis also differs from its funding rate.