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Questions tagged [backwardation]

DEFINITION of 'Backwardation' A theory developed in respect to the price of a futures contract and the contract's time to expire. Backwardation says that as the contract approaches expiration, the futures contract will trade at a higher price compared to when the contract was further away from expiration. This is said to occur due to the convenience yield being higher than the prevailing risk free rate.

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Effects of Backwardation and Contango on Supply

As an example, if on June 1st, we observe that the term structure of oil prices is in backwardation up to the end of that year. After the New Year, the term structure of oil prices is in contango. ...
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Is contango a contradiction?

If a market is in contango the futures curve slopes upward as forward prices are higher than today. It is also true that prices must fall as they converge toward the spot price at the time of maturity ...
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What is a “spread” in commodities futures?

I was reading an article and it states Tightness has returned to the London Metal Exchange (LME) aluminium spreads. The focus point this time around is the December-January spread (CMALZ4-F5),...