When you see a futures curve trending downward, it’s possible you’re observing a market in backwardation. The inverse of contango, backwardation occurs when the futures price for a given date falls below the expected value of a commodity on that date. Salman Khan of the Khan Academy illustrates.
From this video, you’ll understand:
- What it means to have a market “in backwardation”
- Whether backwardation is bullish or bearish in a market
- Why markets find themselves in backwardation