Understanding Premium Trading: What It Means to Trade at a Premium to Futures
In the world of finance and commodities trading, the term “premium” is often thrown around, but its implications can be complex and multifaceted. When we say that an asset is trading at a premium to its futures, we are referring to a situation where the spot price of the asset exceeds the price of its corresponding futures contract. This phenomenon can occur in various markets, including commodities, equities, and cryptocurrencies, and understanding its implications is crucial for traders and investors alike.