What Is the opposite Term for Backwardation?
The opposite term for backwardation is "contango." Contango is the normal market condition where the futures price is higher than the current spot price, reflecting the cost of carrying the asset forward in time. Backwardation is the exception, suggesting immediate scarcity or negative future expectations.
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.
Futures Price
Valuation ⎊ Futures price, within cryptocurrency and derivative markets, represents a binding agreement to transact an asset at a predetermined future date and price, functioning as a standardized forward contract facilitated by an exchange.
Contango
Condition ⎊ Contango describes a derivatives market state where the futures price for an asset is trading at a premium relative to the current spot price, suggesting that the market anticipates higher prices in the future or that the cost of funding and storage is positive.
Normal Market Condition
Characteristic ⎊ A key characteristic of a normal market condition is the adherence of derivative pricing to the cost-of-carry model, resulting in a stable, narrow basis between the futures and spot prices.