Why Is Persistent Backwardation Less Common in Non-Perishable Commodity Futures?
Persistent backwardation is less common in non-perishable commodity futures because it implies that the spot price is higher than the future price, suggesting a negative cost of carry or a shortage. Arbitrageurs can typically exploit this by buying the futures contract and selling the physical commodity, which pushes the spot price down and the futures price up.
The ability to store the commodity makes the reverse cash-and-carry arbitrage efficient, preventing persistent backwardation.
Glossar
Commodity Futures
Basis ⎊ ⎊ Commodity futures, within the context of cryptocurrency derivatives, represent agreements to buy or sell an underlying asset ⎊ often a digital asset or a reference rate tied to crypto ⎊ at a predetermined price on a specified future date, functioning as a standardized forward contract traded on an exchange.
Backwardation Less Common
Condition ⎊ The market state where the near-term futures contract price is lower than the deferred contract price, a structure less frequently observed in typical crypto derivatives markets.