Definitions
from Wiktionary, Creative Commons Attribution/Share-Alike License
- n. The situation in a futures market where prices for future delivery are lower than prices for immediate (or nearer) delivery. Generally arising from a near-term shortage of a commodity.
- n. fee paid by a seller on settlement day either to the buyer or to a third party who lends stock, when the seller wishes to defer settlement until the next settlement day.
from the GNU version of the Collaborative International Dictionary of English
- n. The seller's postponement of delivery of stock or shares, with the consent of the buyer, upon payment of a premium to the latter; -- also, the premium so paid. See contango.
from The Century Dictionary and Cyclopedia
- n. On the London Stock Exchange, the premium paid by a seller of stock for the privilege of postponing its delivery to the buyer until the next fortnightly settling-day. See contango.
Etymologies
from Wiktionary, Creative Commons Attribution/Share-Alike License
Examples
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A certain degree of backwardation is normal (hence the phrase "normal backwardation").
Backwardation, Arnold Kling | EconLog | Library of Economics and Liberty
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"The methodology employed by the underlying index of USCI seeks to minimize the harmful effects of contagion by favoring commodities in backwardation (positive roll-yield) and longer-term contracts," he explains.
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We are seeing signs of increasing demand for energy, evidenced by the oil market recently moving into "backwardation" -- where current oil contracts are priced higher than future ones.
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The result, analysts say, is "backwardation" - a situation in which futures-contract prices are lower than spot prices.
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December Nymex crude futures dropped below the January-delivery contract, ending a situation where the front-month contract was priced higher than those further in the future, also known as backwardation.
Crude Declines on Europe Worries; Falls Out of Backwardation
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Front-month Nymex crude ended with a 14-cent premium to the second month in the fourth day of the market price structure known as backwardation, where near-month contracts are priced higher than those further out into the future.
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Benchmark crude on the New York Mercantile Exchange is now cheaper further in the future—a phenomenon called "backwardation."
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For oil-market veterans, this pattern, called "backwardation" in industry parlance, is a signal that traders are preparing for a period of tight supplies, a clue that higher prices may be ahead.
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Another factor contributing to the rise has been a market condition called "backwardation," where oil contracts for nearby months are priced higher than months further into the future.
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This week, front-month crude on the Nymex jumped in price above subsequent months, a phenomenon known as backwardation that typically signals worries about a near-term supply crunch.
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