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Basis

• Is the relationship between an actual or cash market with a futures instrument. The relationship is typically the simple difference between the cash market and the futures.

• Also known as Cost Basis or Tax Basis. A security's basis is the purchase price after commissions or other expenses, and is used to calculate capital gains or losses when the security is eventually sold.

• (1) Number of days in the coupon period. (2) In commodities jargon, basis is the spread between a futures price and some other price. A money market participant would talk about spread rather than basis.

• Regarding a futures contract, the difference between the cash price and the futures price observed in the market. Also, it is the price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold.

 
 Embedded terms in definition
 Capital gain
Capital
Cash market
Cash price
Cash
Contract
Cost basis
Coupon
Expenses
Futures contract
Futures price
Futures
Investor
Market
Money market
Plus
Purchase
Security
Spread
Stock
Tax basis
 
 Referenced Terms
 401 k plan: Is a retirement plan that the employee can set aside a portion of his or her income. The actual dollar amount is subject to annual change. Benefits of the plan are that it affords portability, reduces the employee's annual gross income for tax purposes, and the employee's contributions are immediately vested. Balances are allowed to grow on a tax-free Basis and there are provisions for employer contributions as well.A type of retirement savings plan, used by private firms or nonprofit employers. Also known as a cash-or-deferred.A tax-deferred defined contribution retirement plan offered by an employer.

 Abc inventory system: Inventory management technique that divides inventory into three groups A, B and C - in descending order of importance and level of monitoring, on the Basis of the dollar investment in each.

 Ability to service debts: The ability of a firm to make the contractual payments required on a scheduled Basis over the life of a debt.

 Adjusted basis: The value attributed to an asset or security that reflects any deductions taken on, or capital improvements to the asset or security. Adjusted Basis is used to compute the gain or loss on the sale or other disposition of the asset or security.

 After tax: Describes funds on which an employee has already paid all income taxes, for example, amounts held outside a 401(k) plan or traditional IRA, or within a Roth IRA. Taxes on benefits derived from these funds, plus investment earnings in a Roth IRA, are not payable when they are received. See Basis. Also known as post-tax.

 
 Related Terms
 

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