Backwardation
Backwardation describes a futures market in which contracts for later delivery are priced below nearer-dated contracts or the spot price. The futures curve then slopes downward as maturity lengthens.
Investment & trading encyclopedia
Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.
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Commodity
A commodity is a raw material or primary product, such as crude oil, copper, wheat or gold, that is largely interchangeable with other units of the same grade. Buyers care mainly about grade, quantity, location and delivery date rather than the producer.
Contango
Contango describes a futures market in which contracts for later delivery are priced above nearer-dated contracts and the spot price. The futures curve then slopes upward as maturity lengthens.
Spot Price
The spot price is the current price at which an asset can be bought or sold for prompt delivery. For commodities and currencies it is the benchmark that futures and forward prices are compared with.