Q.101
Asscenario, when Future price higher than the spot price, is called as
- Contango vs. Backwardation in Commodity Futures:
- Contango: A market condition in which the Futures Price is higher than the Current Spot Price ($F_t \gt S_0$). This is the normal state for storable agricultural commodities, where the price premium reflects the cost of carry (storage, warehousing, insurance, and financing interest).
- Backwardation: An inverted market condition where the Spot Price is higher than the Futures Price ($S_0 \gt F_t$), typically triggered by acute immediate physical supply shortages or high convenience yields.
Correct option: (3) Contango
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