How Does ‘Contango’ and ‘Backwardation’ in the Futures Market Relate to the Cost of Carry?
Contango is a market condition where the futures price is higher than the expected spot price at contract maturity, typically occurring when the cost of carry is positive. Backwardation is the opposite, where the futures price is lower than the expected spot price, often due to a negative cost of carry or high convenience yield.
Glossar
Negative Cost of Carry
Arbitrage ⎊ Negative cost of carry emerges within cryptocurrency derivatives markets, particularly concerning perpetual swaps and futures, where funding rates can invert, creating a scenario where short positions accrue a yield.
Expected Spot Price
Forecast ⎊ The Expected Spot Price serves as a market-derived forecast of an asset's future value, critically incorporating the anticipated impact of climate policy, technological disruption, and resource scarcity by the forecast date.