AL Circle Blog

So, what happens when you borrow in backwardation? Well, the rule is simple—you lose money. Why? Because in a backwardation curve, the nearby price is higher than the future price. That’s just how the market moves! Let’s break it down: If you borrow to postpone a short, say from April to May, April’s price is […]

In our previous discussion, we explored the concept of borrowing carry trades to anticipate long positions. Let’s dive deeper into how borrowing works in a contango market and why it often leads to profit. Borrowing and Long Positions in Contango Imagine this scenario: we’re holding a long position for April but need to shift it […]

In our last discussion, we explored how borrowing is used to postpone a short position, with an example of buying April and selling June. When the market was in contango, we earned profits, and during backwardation, the strategy still worked in our favor. But when the conditions were unfavorable, we faced losses. Today, let’s shift […]

In our previous session, we explored how borrowing works in a contango market. Let’s quickly recap and then shift our focus to backwardation. Contango Recap: In a contango scenario, the price of a future contract for a later date is higher than the price for a nearer date. Here’s how it works: Borrowing in Contango: […]

In trading, understanding the concept of borrowing and its connection to contango can open doors to significant profit opportunities. Let’s break it down. What is Borrowing? Borrowing involves buying a commodity or asset for a near-term date and selling it for a further date. For instance, if you’re short in April and want to move […]

Carry trades are a key strategy in commodity trading, and today, we’re diving into the concept of borrowing. Let’s break it down with an example. Imagine you’re a speculator, and you’ve taken a short position for April. Now, you realize you need to move this position to June. Can you just call your broker and […]

As we step into 2025, let’s explore a fascinating shift in the aluminium market: how a typical contango can transform into backwardation. Contango in Aluminium: In a normal aluminium market, the three-month price is historically higher than the cash price—a classic contango. This reflects costs like storage, insurance, and interest. However, this equilibrium can shift […]

Happy New Year! As 2025 begins, let’s dive into a quick recap of market dynamics we discussed last week. Specifically, we explored two critical concepts: contango and backwardation, and their implications for the aluminium market. What Are Contango and Backwardation? Contango occurs when the future price of a commodity is higher than its current or […]

In our previous discussion, we explored the concept of theoretical contango and its construction. Let’s quickly recap and expand on this idea with a comparison between aluminium and copper. Aluminium: The Basics of Theoretical Contango: Using aluminium as an example, we started with a cash price of $2,600 per tonne. If you buy aluminium immediately, […]

You’ve heard about contango, backwardation, and flat curves before, but let’s revisit these concepts, starting with contango. At its core, contango occurs when futures prices are higher than the current (cash) price of a commodity. But how does a contango build up? To explain this, we look at the theoretical contango, a structure driven by […]