backwardation

Example:The market experienced a strong futures backwardation for wheat, indicating that producers were willing to sell wheat at a current price higher than future estimated prices.

Definition:A situation where the futures contract price is lower than the current spot price of a commodity.

Example:Traders often use backwardation curves to predict future price movements and arbitrage opportunities.

Definition:A curve that represents the difference between the spot price and the expected future price of a commodity, where the curve slopes downwards, reflecting a backwardation market condition.

Example:The trader was able to engage in a backwardation arbitrage by purchasing gold bullion and selling a gold futures contract for a profit.

Definition:A trading strategy that involves buying the commodity in the spot market and simultaneously selling a futures contract at a lower price, profiting from the difference between spot and futures prices when in backwardation.