Contango

Dictionary Says

Definition of 'Contango'

When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date.
Investopedia Says

Investopedia explains 'Contango'

This is the opposite of backwardation.

Related Definitions

  • Backwardation

    A theory developed in respect to the price of a futures contract and the contract's time to expire. Backwardation says that as the contract approaches expiration, the futures contract ...
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  • Inverted Market

    In the context of options and futures, this is when the current (or short-term) contract prices are higher than the long-term contracts.
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  • Futures Strip

    The sale or purchase of futures in sequential delivery months in a single security. Strips allow investors to secure conditions such as yields for a period of time equal to the length of ...
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    • Roll Yield

      The amount of return generated in a backwardated futures market that is achieved by rolling a short-term contract into a longer-term contract and profiting from the convergence toward a ...
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