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What do the terms Backwardation and Contango mean?

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What do the terms Backwardation and Contango mean?
posted Jul 4, 2017 by Ananya Saha

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Contango and backwardation are terms often used within commodity circles. These terms refer to the shape of the futures curve of a commodity such as gold, silver, wheat or crude oil. A futures curve can be plotted on a chart of a particular contract by using an X and Y axis. The X axis contains the various contract expiration dates while the Y axis contains the corresponding futures prices. A normal futures curve will show a rising slope as the prices of futures contracts rises in time. An inverted futures curve will show a falling slope as the prices of futures contracts falls over time.

answer Jul 4, 2017 by Mukul Chag
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