Futures premium, that is, business extension fee and interest on extension date. Business people use the term "futures premium" to describe a special market situation. When the futures contract of a commodity is more expensive than the latest contract, it is called Contango (futures premium).
In the face of contracts with different maturity months, we will see that contracts with uniform varieties and different delivery times will definitely rise and fall together, but their costs are different and the degree of bumps is different. This is indeed a premium between futures contracts with different maturities. So how do we understand the premium of futures contracts?
Futures, as the name implies, are commodities due for delivery in the future. Futures contracts have subject matter, and there are two kinds of subject matter of futures contracts that have not been delivered: one is not yet produced, and the other is probably produced and now put into storage.
Let's look at the first possibility first. If the subject matter is not produced, such as oil is under investigation, as a supplier, there is a risk of not digging out oil. Therefore, to deal with the first one, the premium of futures contracts is really a risk premium.