# Glossary

**Backwardation**

When the price of the futures is lower than the spot price of the underlying asset.

#### Collateral ratio

When borrowing on a fixed rate protocol, this is the value of the collateral, in debt terms, relative to the size of the debt.

#### Composability

Ofter referred as 'money lego' thesis: it refers to the idea of building new DeFi protocols on top of  others (e.g. Contango is built on top of fixed-rate markets, and at the same time it could be leveraged by new protocols to create structured products on top of it).

#### Contango

When the price of the futures is higher than the spot price of the underlying asset.

#### Expiry date

The settlement date at which the price of the futures is identical to the spot.&#x20;

#### Flash swap

An atomic transaction where output tokens are sent to the recipient *before* enforcing that enough input tokens have been received. See [Uniswap docs](https://docs.uniswap.org/protocol/V2/guides/smart-contract-integration/using-flash-swaps).

#### Fixed-rate market

A market that offers the possibility to borrow and lend assets at a fixed rate for a fixed amount of time. E.g [Notional](https://notional.finance/) or [Yield](https://yieldprotocol.com/).

#### Forward

A forward contract is a derivative to buy or sell a specific asset at a set price by a certain date in the future. A forward contract is privately negotiated by two counterparties and It is only settled at maturity.

#### Funding rates

Variable interest rate on the underlying debt, charged periodically by derivative exchanges to keep the price of perpetual futures tethered to the index price of the underlying asset.

#### Futures

A futures contract is a forward contract with standardised terms and is settled on a daily basis.

#### Index price manipulation

The manipulation that can occur when futures are cash settled. See [this article](https://medium.com/coinflex-official/physical-delivery-vs-cash-settlement-adoption-vs-market-manipulation-86e8cbd48837) for more details.

#### Inverse contract

E.g. an ETHDAI inverse contract is simply the opposite pair DAIETH, so it’s quoted in ETH and all margin and PnL calculations are also denominated in ETH.

#### Leverage

Borrowed capital that allows traders to amplify their buying or selling power.

#### Linear contract

E.g. an ETHDAI linear contract is quoted in DAI and all margin and PnL calculations are denominated in DAI.

#### Liquidity pools

Crowdsourced pools of tokens that facilitate trading without an order book between buyers and sellers. The deeper the liquidity of the pool, the smaller the price impact of each trade.&#x20;

#### Margin ratio

This is the value of the margin, posted by a trader, relative to price to open a position.

#### Price impact

The change in price that is directly caused by the size of a trade. Larger transactions cause higher price impacts. It differs from slippage, which is caused by external broad market movements, unrelated to the trade. See more at [1inch](https://help.1inch.io/en/articles/4585109-what-is-price-impact-vs-price-slippage-in-defi).

#### Spot market

A market that offers swapping assets at the spot price. eg. [Uniswap](https://uniswap.org/).

#### Tokenized NFT position

An ERC-721 Non-Fungible Token that represents ownership of a position. Tokenizing a position allows the independent transfer of its ownership without the need to update Contango's internal accounting. This enhances composability, as positions can be bought and sold on a secondary market or in a private transaction, and potentially used as collateral in third party protocols.
