Ignoring convenience yields, the theoretical futures price for a commodity with a positive cost of carry should typically exhibit
A) Backwardation.
B) Contango.
C) Either backwardation or contango depending on the delivery month.
D) Either backwardation or contango depending on the initial level of the spot price.

Question

Quizplus · Accepted Answer

A positive cost of carry implies that the futures price is higher than the spot price. This typically results in a contango market where the futures price gradually decreases as the delivery date approaches.

Ignoring Convenience Yields, the Theoretical Futures Price for a Commodity