What is Backwardation?
Today, in this short [What is Backwardation?] video 🎥, we’re diving into the world of commodities and talking about a term that you may have heard before – Backwardation. In this short [What is Backwardation?] video 🎥, we’ll explain what it means and how it affects the market.
If you look at the graph on your screen, you’ll see the price of a commodity over time. When the price decreases gradually, it’s called ‘contango’. But when the price drops rapidly, it’s called ‘backwardation’. This is represented by a flat or inverted line.
Now, why does this happen? Basically, it’s a result of high demand and low supply for a particular commodity. And it often occurs when the market predicts limited supply in the future.
For traders, backwardation can be seen as an opportunity to make a profit by buying the commodity at a lower price and selling it for a higher price later on. This makes backwardation an important concept to understand for those involved in the world of trading and investing.
So, to sum it up – backwardation means the price of a commodity is expected to increase in the future. We hope you found this short [What is Backwardation?] video 🎥 informative and gained a better understanding of this term.
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#Backwardation #Contango #commoditiestrading
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