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Glossary > B > "Backwardation" Definition

Backwardation

A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This situation may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango.

The theory that says futures prices will tend to rise over the life of a contract. Therefore the near-term contracts trade at a higher price than the longer-term contracts.

In the futures market the price of a contract for future delivery of a commodity usually trades above the spot price because the owner of the contract is deemed to have the advantage of holding cash until the time of delivery and is assumed to be able to earn interest on that cash.Occasionally, however, the spot price actually exceeds the futures price. This is known as backwardation, or an inverted market.

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Backwardation - A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This situation may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango.

The theory that says futures prices will tend to rise over the life of a contract. Therefore the near-term contracts trade at a higher price than the longer-term contracts.

In the futures market the price of a contract for future delivery of a commodity usually trades above the spot price because the owner of the contract is deemed to have the advantage of holding cash until the time of delivery and is assumed to be able to earn interest on that cash.Occasionally, however, the spot price actually exceeds the futures price. This is known as backwardation, or an inverted market.

Backwardation : a market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. this situation may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. the opposite of contango.

the theory that says futures prices will tend to rise over the life of a contract. therefore the near-term contracts trade at a higher price than the longer-term contracts.

in the futures market the price of a contract for future delivery of a commodity usually trades above the spot price because the owner of the contract is deemed to have the advantage of holding cash until the time of delivery and is assumed to be able to earn interest on that cash.occasionally, however, the spot price actually exceeds the futures price. this is known as backwardation, or an inverted market.