Options & derivatives
Backwardation
When futures prices further out are lower than nearer ones, so rolling earns money.
How it works
Backwardation typically signals immediate scarcity: buyers are paying a premium for delivery now rather than later.
It is the favourable condition for a futures-based long position, since each roll is into a cheaper contract.
Related terms
- ContangoWhen futures prices further out are higher than nearer ones, so rolling a position costs money.
- Futures contractA standardised, exchange-traded agreement to buy or sell something at a set price on a future date.
- CommodityA raw physical good — oil, gold, wheat, copper — traded in standardised units.
More in Options & derivatives
- Call option
- Assignment
- Cash-secured put
- American and European options
- Warrant
- Contract for difference
- Volatility crush
- Covered call
All 30 Options & derivatives terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.