Normal Markets

What this video covers

• Why distant delivery months trade higher than nearby months in a normal market, and why cash or spot sits at the bottom of the curve
• The four interchangeable labels (normal, carrying-charge, premium, and contango) and how the exam uses vocabulary switching to test whether you truly know they are synonyms
• Why normal is strictly a technical label for curve shape, not a description of calm or stable underlying prices
• The three core carrying charges: storage, insurance, and financing (interest), and how each pushes deferred months higher as the delivery date extends
• What full carry means: the spread between two delivery months equals the complete cost of holding the physical commodity from the earlier month to the later month
• Why the premium of a distant month cannot exceed full carry due to arbitrage, and why full carry is a ceiling on the spread rather than a floor
• How partial carry fits into the structure, and why spreads can sit anywhere from a small premium up to but never above full carry