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Backwardation is a situation when the futures price of an asset is lower than its current index/spot price. Backwardation doesn’t frequently happen and is considered as abnormality most of the time, as most futures usually trade at the premium to the index/spot price (a situation known as contango).

Backwardation typically happens after some unexpected events which affect supply and demand of the underlying asset traded in the futures market.

Opposite term: Contango