Contango & backwardation in commodity forward markets

[acidentallycool]

Thank you i got it finally!

[bionicturtledotcom]

@acidentallycool Awesome, thanks!

[kristonren]

so, Normal curve = contango.... Inverted curve = backwardation.

:) Im glad I watched this link, made it easier to understand

[kristonren]

@kristonren with exception to the alternating cycles

[04473272]

I love you David

[ngopalakrishna]

How I wish I had a prof like you David.. Thank you!

[ggn1]

So when silver had a price spike to $50 an ounce, and people would only buy at $35 an ounce, would that be considered contango leading to forward backwardation?

[felixdov]

It is just one of those things that is really hard for my simple brain to deal with...doooh

[guptarashmi08]

Thank you... very informative and easy to understand video

[watcherjohnny]

Great vid!!!

[admetric]

Thank you David. I was having a discussion concerning Contango vs. backwardation with a co-worker and your video resolved all problems. Very clear explaination.

[bionicturtledotcom]

@admetric nice to hear, glad i could help!

[slick7fool]

ongango?

[Seaxuan]

Hello Mr Harper, Could you help me to understand why in the crude oil future markets, lots of traders often trade Jun/Dec & Dec red Dec future calendar spread, are there any fundamental reasons behind this?

[mamsen7]

@Seaxuan Seasonlity: Typically In June, Gasoline demand is high, refineries out of maintenance. Having peak demand in Dec is rare as compared with June. So one possible play would be go long June and short Dec.

[ambaraba777]

Thank you very much for this and other videos. It is really well explained.

[bionicturtledotcom]

@watcher222: great point, we don't observe the EFSP. The "theory" is that, if the underlying has any systemic risk, the F < EFSP by risk premium. Think about the long forward position: why would he commit to zero future profit it he assumes risk? He wouldn't, he expects a difference like he expects compensation for risk beared (i.e., theory of normal backwardation)

[watcher222]

I was OK up till about 3'25'' but I can't get the concept of how the forward price differs from the `expected future spot price (EFSP).' At any moment isn't the EFSP the forward price? Otherwise how do we know what the EFSP is?

[erickberguer]

Great explanation. Thanks.

[jwilson770]

Thanks for posting! I've been wondering what the difference between these two was for awhile!

[ozziindaus]

Thanks for the lesson. I do have one question. With backwardation, as the case with crude oil recently, this would suggest that one should either hold short positions or simply dump the stock, right? However I keep hearing that this is not the case with Gold and Silvers recent backwardation. Many reports on backwardation in regards to PM's is suggesting something else (currency crisis). Why and why does it not indicate a future dump of COMEX contracts?

[bcpietsch]

glad I do not have to take a test on this...yeepers///

cpmtamgp? wotj me pm upir mprmal backwardation or could you just gve me normal contamgo baby? tje point was of this?

[bionicturtledotcom]

the point? learning. In some subjects, people like to learn stuff, to, you know improve themselves. For example, you can even learn how to type these days :)

[daridaist]

I appreciate your videos

everything is very clearly explained

thanks

[KeyboardPacifist]

@bionicturtledotcom thanks david. I work as a physical therapist & hear my patients yap a lot about speculation. I only have an outdated notion of how world events and competiting markets affect the price of barrels. This stuff is pretty far out of my realm - but I love when a bridge of knowledge is extended ... Now I've got another tool to view what is going on around here. I pay the highest cost at the pump (Bay Area, CA) - I'd like to know if contango adds momentum to the E(S)t