The gross basis is the cash bond price minus the futures price times the bond's conversion-factor. A trader who buys the bond in the repo market and sells futures against it collects coupon income and pays repo, and captures whatever richness sits in the futures leg.
Returns per unit of capital are minuscule, so the trade is run at leverage of fifty to a hundred times through repo financing. That makes it a systemic concern: when repo rates spike or margins are raised, the whole cohort unwinds at once, as in March 2020 when the trade blew out and forced central bank intervention.
The embedded optionality — the short's right to choose which bond to deliver — means the basis is never purely arithmetic. See cheapest-to-deliver.
Example: a note at 99-16 with a conversion factor of 0.8412 against a future at 118-08. Gross basis = 99.50 - (118.25 x 0.8412) = 0.03 points, about $30 per $100,000 face. Only leverage makes that worth the desk space.
Related: cheapest-to-deliver, conversion-factor, implied-repo-rate, treasury-futures, zn