Economics Options And Futures Questions
Backwardation in futures trading refers to a situation where the futures price of a commodity is lower than its expected spot price at the time of delivery. This occurs when there is a high demand for the commodity in the current market, leading to a scarcity of supply in the future. Backwardation typically indicates a bullish market sentiment and can be attributed to factors such as supply disruptions, production constraints, or market expectations of future price increases.