Previous studies have shown that the profit to the “buy low-basis commodities and sell high-basis commodities” strategy is an effective pricing factor for commodity futures returns. Let us call this factor the low-high basis factor, or the LHB factor, in short. The goal of this paper is to better understand the LHB factor. We make three contributions to the literature: First, we present additional tests of the significance of the LHB factor in the factor model framework, and confirm the relevance of the LHB factor. Second, we investigate the relationship between the LHB factor and the other factors of stock, FX, and commodity markets, and show that the LHB factor is not redundant. Finally, we examine the time-variation in, and the predictability of, the LHB factor returns. We find that the LHB factor returns can be predicted by spread variables, especially by the implied volatility spread. Our findings support the view that the LHB factor is a risk premium rather than a behavioral phenomenon. We discuss the implications on strategic and tactical asset allocations.