Contango

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Contango is a futures market term that describes a normal market condition of expected rising prices in succeeding months.[1] In a market that is in contango, prices are progressively higher for each listed futures month of a contract.[2] Contango is the opposite of backwardation.[3][4]

In theory contango market conditions represent an increase in price from today's spot price plus the potential arbitrageur's cost of storage and the time-value of money.[5]

Other Meanings and Etymology

Originally, contango was defined as a fee paid by a stock buyer to the seller in order to postpone the delivery of the stock to a future date.[6] The etymology of the word is not clear, but is assumed to be a corruption or mis-pronunciation of the word "continue".[7]

Also See

Futures glossary

References

  1. Oil speculation: It's back. Fortune.
  2. Contango - What's in a name?. Contango Oil & Gas Company.
  3. Glossary of Terms. U.S. Commodity Futures Trading Commission.
  4. Contango Lessons. Middle East Economic Survey.
  5. Peak Oil Contango?. The Oil Drum.
  6. Totally Weird and Wonderful Words. Mantex.
  7. James Mitchell, "Significant Etymology; Or, Roots, Stems, and Branches of the English Language.". Google Book Search.