Contango vs Backwardation - What are they and how do they affect futures prices?

The futures market is among the most complex ones by design. As a derivative, futures contracts might naturally appear a bit more complicated for beginners than more traditional instruments like stocks or forex. A primary reason why investors and traders struggle to ensure a flying start in the futures market is that they skip or fail to get a thorough understanding of critical concepts like backwardation and contango. Due to this, they are unprepared to navigate inverted markets and suffer losses from their futures investments. This guide will help you understand contango and backwardation. You’ll also learn how these market conditions affect your futures portfolio.

0:00 Music Intro
0:10 Intro
1:05 Disclaimer
1:18 Contango vs Backwardation
3:35 Why markets invert
4:35 Contango
6:05 Backwardation
7:46 Importance
8:42 Futures
9:56 Why it happens
13:04 Side by side
14:33 Final thoughts

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