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Definition of 'Convergence'
A movement in the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value.
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Investopedia explains 'Convergence'
As a futures contract nears expiration, the futures price and the cash price converge to eventually become the same price (usually).
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For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
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Take advantage of short-term price moves by pinpointing reversals.
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Find out how to make sense of this tricky - but profitable - formation.
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