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When Does a Futures Market Enter a State of “Backwardation”?

Backwardation occurs when Spot Price > Futures Price, indicating a negative cost of carry or high current demand.
Greeks.Live21.11.25

When Does a Futures Market Enter a State of “Backwardation”?

A futures market is in backwardation when the current spot price of the underlying asset is higher than the price of its futures contract. This is an inverted market structure, meaning the cost of carry is negative.

Backwardation often occurs when there is high demand for the spot asset right now, or a shortage, making immediate possession more valuable than future possession. It can also reflect an expectation of a significant price drop in the future.

How Does the “Cost of Carry” Relate to the Basis in Traditional Finance?
How Is the “Cost of Carry” Related to the Profitability of Futures Arbitrage?
How Does the Cost of Carry Affect a Miner’s Hedging Decision?
What Is ‘Contango’ and ‘Backwardation’ in Futures Markets?

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