Question: We defined the basis at time Bt = St - tFT If the market is in contango when you initiate your position at time t,

We defined the basis at time Bt = St - tFT

If the market is in contango when you initiate your position at time t, what is the expected change in the basis from t to maturity T?

  1. No change
  2. An increase
  3. A decrease
  4. First an increase and then a decrease
  5. All possibilities are equally likely

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