Contango and Backwardation are very important to understand
They describe the cuurent state of a futures curve typically found in broad based commodity indexes. Most will not have spot(todays price) represented but rather will hold various futures contracts.
Contango-The futures contract price is more expensive than the current price.
Backwardation-The futures contract price is less expensive than the current price.
This is important as studies have demonstrated that over time buying indexes in contango leads to subpar performance. Since most ETFs and funds that hold long only commodity indexes are subject to varying degrees to this risk, I recommend a thorough examination of your current or prospective holdings in this area.
Tom Koehler, CFA