If the futures price is much higher than the spot or current price, that is a sign that smart people with their own money on the line think that:
A) there will be an excess supply in the near future.
B) supply disruptions may soon occur.
C) demand will decrease rapidly in the future.
D) supply will be stable in the near future.

Question

Quizplus · Accepted Answer

If the futures price is much higher than the spot or current price, it suggests that supply disruptions may soon occur. This is because buyers are willing to pay a premium for the commodity in the future, anticipating that there could be a shortage or supply interruption. This indicates that smart people with their own money on the line have foreseen potential supply constraints and are willing to pay a higher price to secure supply in the future.

If the Futures Price Is Much Higher Than the Spot