Don't blame your jeans. A narrow basis is the real reason you can’t keep your pants up without a belt.
In the commodities market, people keep an eye on the difference between the spot market and the futures market. The spot market relates to purchases you are making now. You need 100 barrels of oil delivered this afternoon...you buy them on the spot market.
The futures market refers to contracts with delivery dates down the road. You have a contract to purchase 100 barrels of oil at $75, expiring in July. The transaction isn't set to take place until July, three months from now. That transaction (and the $75 price) takes place in the futures market.
If prices for the spot market and futures market get close, meaning there's not much difference between the two, that’s known as a narrow basis. So if the spot market for oil is $74.95 and the July futures price is $75...that's a narrow basis.
That situation suggests a market with a lot of visibility and stability. Investors are essentially betting that supply and demand trends are likely to stay the same in the foreseeable future. Prices now are fundamentally the same as they are expected to be in the future.
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Finance: What is Tax Basis?8 Views
Finance allah shmoop What is tax basis Well your basis
is your cost Your costs for assessing how much you
owe when the tax man coming you bought a thousand
shares of whatever dot com at twelve bucks a share
in its eye po and huzzah Three years later the
stock is at thirty You decide whatever dot com is
now passe because a kardashians said so it'll be over
taken by whenever dot com and you want to sell
So you dio and you live in a thirty percent
marginal tax blue state And that is your federal tax
rates in twenty percent But then you add in ten
percent for state taxes and whatever's left for obamacare and
you pay about thirty percent tax on your gains Well
you paid twelve grand to buy the stock and after
the sale you took in thirty grand when you sold
it for a gain of eighteen thousand dollars Your tax
basis on those shares is twelve grand so you pay
thirty percent tax on the eighteen grand of gain or
fifty four hundred dollars to net from the sale of
thirty thousand dollars worth of stock How much Yeah twenty
Four thousand six hundred dollars He fancy math Had you
just gotten those shares free I'ii they were gifted to
you and you had no tax basis or a tax
basis of zero dollars a share Well then your gain
would have been from zero to thirty grand or a
gain of thirty thousand dollars to then be taxed at
thirty percent or nine grand in taxes to net just
twenty one thousand dollars after the sale So having ah
high tax basis or at least being able teo point
toe one saves you money when the tax man coming
and well that's pretty much it alright he's gone Now
you can all come out Come on it's Okay it's 00:01:53.698 --> [endTime] safe
Up Next
What is Cost Basis? For accounting purposes, the cost basis is the amount invested at the time of asset purchase. That is subtracted from the sale...