Basis Differential

Let's start with a couple of basic definitions:

Spot price: the present price at which an asset (currency, other securities, etc.) can be immediately purchased or sold.

Futures contract: an agreement (legally binding, of course) to either sell or buy an asset at a designated future time and price.

Futures price: the price specified in a futures contract.

Now the important one: basis differential is the difference between the spot price of an asset and futures price specified on the contract. The difference between Flying High Medicines LLC's spot price and the agreed upon futures price for their medical supply contract will be the basis differential.