Who is taking the extra profit here?Submitted by n1ck90z t3_124eypt in wallstreetbets
KutteKiZindagi t1_je0avvn wrote
Reply to comment by konstantinos2000 in Who is taking the extra profit here? by n1ck90z
On the spot price. Lets assume you want to move some shit from china to US today. You get the quoted price and you pay to move it.
Long term contracts are for regular shippers to ship in future.
The shipping price is in "contango" which means the long term contract price is higher than current price. Which means the market expects the shipping price to rise in the future.
Equivalent-Half-964 t1_je38c2v wrote
It does not mean that the market expects the shipping price to rise in the future, that's not what futures do. It means the spot price is carried at a positive rate into the future, as a no-arbitrage price, accounting for costs and income in holding the contract.
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