backwardation

backwardation
A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango. Bloomberg Financial Dictionary
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1. When the bid price exceeds the offer price for a stock, the stock is in backwardation. For example, where the prices are 512 - 510. This means that the best price at which market makers will sell the stock is less than the best price at which they will buy the stock. This is unusual, since market makers will normally charge a spread, buying stocks for less than the price at which they will sell them. The reason is usually some market distortion, such as a share repurchase scheme by the company. When the price is backward, the touch strip on the SEAQ turns red. Dresdner Kleinwort Wasserstein financial glossary
See also choice price and SEAQ. Dresdner Kleinwort Wasserstein financial glossary
2. In futures markets, when the future price is less than the cash price. Dresdner Kleinwort Wasserstein financial glossary
See also discount and contango. Dresdner Kleinwort Wasserstein financial glossary
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On futures markets, a market where a commodity is in shortage, causing near contract months to sell at a premium and distant contract months to sell at discount. Exchange Handbook Glossary
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The situation where an investor on the Forward Market postpones a bear position to the next fortnight period, speculating on a continuous falling of the prices: delay of delivery of sold securities until the next settlement day. NYSE Euronext Glossary

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backwardation back‧ward‧a‧tion [ˌbækwəˈdeɪʆn ǁ -wər-] noun [uncountable]
FINANCE when a commodity that will be delivered in the future has a higher price than one that will be delivered now:

• In an economic slowdown it is surprising to see the copper market in backwardation.

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   In commodity markets, backwardation is a situation where the cash or near delivery price rises above the price for forward delivery. The forward price is usually higher than the cash price to reflect the added costs of storage and insurance for stocks deliverable at a later date. Shortage of supply is often to blame for backwardation, because demand for the spot or cash product rises sharply, but the futures price stays steady because more supplies are expected in the future. The opposite of backwardation is contango.
   ► See also Contango, Futures.

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backwardation UK US /ˌbækwəˈdeɪʃn/ US  /-wɚd/ noun [U]
► FINANCE, STOCK MARKET a situation in which the price of a commodity (= a product, such as oil or a metal, that is traded in large quantities) is lower if the buyer is to receive the commodity at a future date than it is if the buyer receives it immediately: »

Silver has been in backwardation for the past five weeks.

→ Compare CONTANGO(Cf. ↑contango)

Financial and business terms. 2012.

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Look at other dictionaries:

  • Backwardation — is a futures market term: the situation in which, and the amount by which, the price of a commodity for future delivery is lower than the spot price, or a far future delivery price lower than a nearer future delivery. One says that the forward… …   Wikipedia

  • Backwardation — Backwardation, manchmal auch inkorrekterweise als backwardization bezeichnet, ist ein Zustand auf Future Märkten, bei welchem Verträge, die ihrem Enddatum näher liegen, zu höheren Preisen gehandelt werden als Verträge, die noch länger laufen. Der …   Deutsch Wikipedia

  • Backwardation — Back war*da tion, n. [Backward, v. t. + ation.] (Stock Exchange) 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}. Biddle.… …   The Collaborative International Dictionary of English

  • Backwardation — (engl., spr. Bäckwärdeschn), bei Staatspapieren Zinsen, welche der Verkäufer noch tragen muß …   Pierer's Universal-Lexikon

  • Backwardation — (engl., spr. bäck ŭardēsch n), beim Handel mit Wertpapieren die noch vom Verkäufer zu tragenden Zinsen; dann soviel wie Deport (s. d.). An der Londoner Börse ist B. der übliche Ausdruck für das Ausleihen von Effekten von einer Liquidation zur… …   Meyers Großes Konversations-Lexikon

  • Backwardation — (engl. Bäckwardäschn), bei dem Handel mit Staatspapieren die dem Verkäufer noch zufallenden Zinsen …   Herders Conversations-Lexikon

  • Backwardation — A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This situation may occur in when the costs of storing the product until eventual delivery are effectively subtracted from the… …   Financial and business terms

  • Backwardation — A theory developed in respect to the price of a futures contract and the contract s time to expire. Backwardation says that as the contract approaches expiration, the futures contract will trade at a higher price compared to when the contract was …   Investment dictionary

  • backwardation — noun 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. 1991: gold has never gone into backwardation in any… …   Wiktionary

  • Backwardation — …   Википедия

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