Lessons
- Defining Commodities
- Commodity Markets - Types of Commodities
- Commodity Traders and Future Value
- Types of Markets for Commodity Trading
- Commodity Markets: Price Discovery, Price Risk Management and Regulation
- Regulation of Commodity Markets
- What is Contango?
- What is Backwardation?
- Backwardation and Contango
What is Contango?
A market is said to be in Contango, when the price of a futures contract is above the expected spot price. As the time passes and the delivery approaches, the futures price will converge to the spot price. In commodity markets, the reason for contango could be the cost of storage and insurance of the commodity underlying the contract.
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