Derivatives
Convergence
Definition
What is Convergence?
The tendency of a futures price and spot priceThe current market price for immediate or near-immediate delivery of an asset. to move together as expiration approaches.
Example in practice
How This Looks in Practice
ArbitrageSeeking to profit from price differences for the same or closely related assets while limiting directional risk. causes the futures basis to narrow near delivery.
Keep learning
Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.