Backwardation refers to a situation in which the price of futures contracts gets lower as the delivery date gets further in the future.
So a contract with a delivery date four months from now would be cheaper than one with a delivery date two months from now. The opposite situation is called contango.
Related Fool Articles
Recent Mentions on Fool.com
- Yelp, Inc. Tumbles After Another Impressive Quarter
- 4 Energy Stocks I'll Be Buying If the Stock Market Crashes
- 3 Solid Stocks With Decades of Annual Dividend Increases
- Why Time Warner Cable's Share Buybacks Are So Smart
- 4 Things to Watch as Yandex NV Looks to Calm Fears About Hard Times in Russia
- The 1 Thing Successful Investors Never Do