Glossary - ChicksX

Contango and Backwardation are futures market conditions. Prices are higher or lower than the expected future spot price.

Contango and Backwardation are terms in futures markets. Contango occurs when the futures price of an asset is higher than the expected future spot price. It usually indicates storage costs and carrying charges. Backwardation is the opposite. The futures price is lower than the expected future spot price, often due to supply shortages or higher demand. These conditions help traders and investors make decisions about buying or selling futures contracts. Understanding these can aid in making informed trading strategies and managing investment risks effectively.