• Backwardation & Contango

    Backwardation denotes to the situation where the futures price is below the spot price. The main Reason for Backwardation is that there should be some significant benefit for holding the asset which compensates the cost of holding the asset future.

    Contango denotes to the situation where the futures price is above the spot price. It happens because of holding cost of any asset and risk free return on the money if not invested to buy any assets. This is the most normal situation in the futures market.

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