Backwardation
Backwardation is when the current price, or spot price, of an underlying asset is higher than prices trading in the futures market.
Definition: Inverse P/E ratio refers to the situation where the current price in the spot market (i.e., spot price) is higher than the trading price in the futures market. This usually indicates that the market has lower expectations for future prices or that there is a short-term supply-demand imbalance in the spot market.
Origin: The concept of the inverse P/E ratio originated with the development of the futures market. The futures market first appeared in Japan in the 17th century for rice trading. Over time, the futures market expanded to other commodities and financial instruments. The inverse P/E ratio, as a market phenomenon, reflects market participants' expectations for future price trends.
Categories and Characteristics: The inverse P/E ratio can be divided into two categories: 1. Commodity market inverse P/E ratio: For example, the spot price of agricultural products or metals is higher than the futures price. 2. Financial market inverse P/E ratio: For example, the spot price of stocks or bonds is higher than the futures price. Characteristics include: 1. Reflects the market's pessimistic expectations for future prices. 2. May be caused by short-term supply-demand imbalances. 3. Investors can profit through arbitrage trading.
Specific Cases: 1. The spot market price of a certain agricultural product is 100 yuan/ton, while the futures market price is 90 yuan/ton. Investors can profit by buying futures contracts and selling in the spot market. 2. The spot market price of a certain stock is 50 yuan/share, while the futures market price is 45 yuan/share. Investors can profit by buying futures contracts and selling in the spot market.
Common Questions: 1. Why does the inverse P/E ratio occur? Answer: It is usually due to the market's pessimistic expectations for future prices or short-term supply-demand imbalances in the spot market. 2. How can investors profit from the inverse P/E ratio? Answer: Through arbitrage trading, i.e., selling in the spot market and buying in the futures market.
