Contango and backwardation review | Finance & Capital Markets | Khan Academy

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Review of the difference uses of the words contango, backwardation, contango theory and theory of normal backwardation. Created by Sal Khan.
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Finance and capital markets on Khan Academy: In many commodities markets, it is very helpful for buyers or sellers to lock-in future prices. This is what both forwards and futures allow for. This tutorial explains how they work and what the difference is between the two.
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[@capslockbandit]

As a commodities investor I just want to say that backwardation is rare and frequently bullish. In a nutshell it means investors are willing to pay a premium for something (silver for example) now instead of holding off delivery until a later date. This often precludes shortages of varying degrees and likely upward price movement. The reason this is kind of counter-intuitive is because metal in 9 months should be more expensive just based on storage costs, people demand real metal, not paper.

[@mustavogaia2655]

XAUUSD and GC recently presented some backwardation, proofing your point.

[@nancyverma9653]

I went to several sources to understand this and it has been quite confusing whether its about term structure or comparison to the expected spot price. For the first time, I see a source where the difference between backwardation/contango and normal backwardation/normal contango is covered. Thank you for explaining !

[@jc_777]

The same. How can the other instructors just plainly screw up explaining this concept? It's almost as if they all colluded to make it seem like a mystery.

[@jeffy141]

great explanation

[@vaibhavpawar6432]

In nutshell: Contango/Backwardation at a particular time is opposite of Contango/Backwardation when observed over a period of Time. Note: Normal Contango/Backwardation is different from just Contango/Backwardation

[@tylermilsop]

This is the confusing part. Some chart show contango as upward sloping (futures curve), but then some graphs show contango downward sloping. It's confusing and I still don't really get why lol.

[@robertcliffort2354]

Khan excellent.

[@DeltaCommando52]

yay khan!

[@snipz127]

here because of oil

[@GenieInAFantaBottle]

hi

[@SainterX]

3rd comment ! wooo

[@asdee01]

you have lost your way,