The gap between visible spreads and realistic returns
When you see a basis spread of 10% annualized, that is the gross basis—the raw difference between futures and spot prices, annualized.
This number looks attractive but ignores the costs of actually capturing it. Trading is not free, and basis trades require multiple transactions.
The realistic return is always lower than the gross spread. Understanding this gap is essential for making sound trading decisions.
A basis trade requires four transactions: buy spot (entry), sell futures (entry), sell spot (exit), buy/settle futures (exit).
Each transaction incurs fees. At 0.05% per trade, four trades cost 0.20% round-trip. For a 30-day hold, that is 2.4% annualized.
Slippage adds more. Crossing bid-ask spreads costs 0.02-0.10% per leg. Four legs can add another 0.1-0.4% to costs.
A 10% gross basis can become 7-8% after fees and slippage—a 20-30% reduction in expected return.
Gross basis is easy to calculate: just compare prices. It requires no assumptions about your specific costs.
Marketing often uses gross figures because they look more attractive. "10% APR" sounds better than "7% after costs."
Many traders learn the hard way that gross figures are not actionable. Sophisticated traders always think in net terms.
FYOS uses model_adjusted_basis_apr as the primary metric—basis APR after fees, slippage, and trust adjustments.
This provides a conservative, execution-aware view of what you might actually capture.
The adjustment is not a penalty; it is reality. Seeing adjusted returns helps you compare opportunities fairly.
When comparing opportunities, always use adjusted metrics. A 6% adjusted return beats an 8% gross return that costs 3% to execute.
Filter out opportunities where gross basis barely exceeds your cost structure. Thin margins leave no room for error.
Consider your actual fee tier. Lower fees mean more of the gross basis flows to you.
Factor in slippage based on position size. Larger positions often face worse execution.
Use tools that show adjusted returns, not just gross spreads. Make decisions based on realistic expectations.
Round-trip execution (four trades) typically costs 0.2-0.5% in fees plus 0.1-0.3% in slippage, totaling 0.3-0.8%. Annualized over a 30-day hold, this is 3.6-9.6% APR consumed by costs.
Gross basis is useful for quick screening—if gross basis is low, adjusted will be even lower. But never make decisions based solely on gross figures.
FYOS applies conservative fee estimates, slippage models, and trust-based adjustments to transform gross basis into model_adjusted_basis_apr—the primary execution-aware metric.
Yes. Lower your fee tier through exchange loyalty programs. Use limit orders to reduce slippage. Choose liquid pairs where execution is cheaper. Every basis point saved flows directly to your return.
Gross basis is simpler to calculate and looks more attractive. Some platforms prioritize marketing appeal over realistic guidance. Always ask: what are my actual expected returns after costs?
See realistic basis returns
FYOS shows execution-aware returns, not misleading gross spreads. Free beta access.
This content is for educational purposes only. Trading involves risk of loss. Always conduct your own research before making investment decisions.
Cookie preferences
We use essential cookies for session continuity and optional analytics cookies to improve the beta experience. You can accept or reject non-essential cookies. Learn more in our Privacy Policy.