Theory of normal backwardation
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most speculator doesnt need the commodity itself since they would have to pay cost of carry if they do
hartanto68 1 year ago
i can explain why speculator didnt buy at spot 10. since spot price=cash price. which means speculator would need to take delivery in 2-3 days. since speculator usually doesnt take delivery (assumption).
most speculator are using either forward or futures contract to capture profit ( often position are closed before the delivery date).(storage,insurance,delivery,financing,etc). they would rather use futures/forward since delivery doesnt have to be in 2-3 days depending on the xpiration.
hartanto68 1 year ago
This video really explains the theory good. However I have a question. Let's assume the commodity is silver. Why the speculator doesn't buy the commodity on the spot price of 10, but instead buys a future for 10.41?
edlund40 2 years ago
Good video, makes the theory easy to understand, simple and easy to follow!
aduy1109 2 years ago
thanks..clarifies well !
ashu851 2 years ago
really interesting, you make it so clear, thanks !
Castorios 2 years ago