Series 3: Exercise

Exercise

Answer true or false.

1. _____ Basis is calculated by subtracting the current futures price from the spot price.

2. _____ A commodity with a June cash price of $4.20 and a September futures price of $4.10 would be referred to as “10 over September.”

3. _____ Cash price is not affected by local conditions.

4. _____ Basis is identical to a commodity’s cost of carry.

5. _____ Basis for a commodity will typically become more negative during its harvest month.

6. _____ Basis always converges toward zero a