A forward pricing sales arrangement which involves determining the cash price of a forward sales agreement (a futures contract) either by the buyer or seller within a specified time. During that time, the previously agreed basis is applied to the then- current futures quotation. Sales agreements specify the price usually in terms of the basis which captures the difference between the futures price and the spot price.

For example, an agreement was concluded in April and the two parties agreed on a time horizon ending in October so that a basis of $8 will be added to the current futures quotation. In this sense, either party or both parties will have the option to determine the time when the price is to be paid. The buyer may choose to settle the price in September. If the price then is $100, the buyer will fix and settle the price at $100 + the basis (this is equal to $108).

The basis may be positive (+) or negative (-) depending on the futures price/ sport price differential.