Define ‘Contango’ and ‘Backwardation’ in Futures Markets.
Contango is a market condition where the futures price of a commodity or asset is higher than the expected future spot price or the current spot price. This typically occurs when there is a 'cost of carry' (storage, insurance, interest).
Backwardation is the opposite, where the futures price is lower than the expected future spot price, often occurring when there is a high convenience yield or a supply shortage.
Glossar
Backwardation
Contango ⎊ ⎊ Backwardation, within cryptocurrency derivatives markets, signifies a futures contract price trading below the expected spot price, a deviation from the more common contango structure.
Expected Future Spot Price
Expectation ⎊ The expected future spot price represents the market's consensus forecast of an asset's price at a specific point in time.