contango/backwardation vs spot

[daniel_ma]

just want to know exactly contango vs "spot" or "expected future spot" price, can anyone tell me which "spot" it refers to explain contango market?

many thanks

daniel

 

[ShaktiRathore]

Hi
spot is used to explain contango market while expected future spot is used to explain normal contango market.
thanks

 

[daniel_ma]

Hi
spot is used to explain contango market while expected future spot is used to explain normal contango market.
thanks

so what is the dif between normal contango vs contango?
hope can explicitly explain on it. thanks

 

[ShaktiRathore]

hi
normal contango when expected future spot(E(ST))<Forward Price(F(0,T)) and contango when spot price(S(0))<Forward Price(F(0,T)).
thanks

 

[David Harper CFA FRM]

@daniel_ma Consistent with @ShaktiRathore 's definitions, I like to say that contango is observable, because you can see F(0) > S(0), but normal contango (like normal backwardation) is not observable because you cannot actually observe E[S(t)]

 

[daniel_ma]

@daniel_ma Consistent with @ShaktiRathore 's definitions, I like to say that contango is observable, because you can see F(0) > S(0), but normal contango (like normal backwardation) is not observable because you cannot actually observe E[S(t)]

many thanks, David!