Contango

Business, Legal & Accounting Glossary

Definition: Contango




Full Definition of Contango


Contango refers to a situation that can arise in the futures market.

When the price of a futures contract is lower than its spot price, or when a price that is farther in the future than a nearer future price is higher, then it is said to be ‘in contango’.

If there was a curve showing the value of a contract sloping upwards over time, then it would be contango curved. In theory, this would suggest that prices are expected to rise over the life of the contract(s).

Backwardation refers to the opposite situation when a future price is lower than the spot price.

Common Usage

Traders will say that the forward curve is ‘in contango’.

The term ‘contangoed’ is sometimes used, but it is generally considered to be incorrect.


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Definition Sources


Definitions for Contango are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 28th March, 2020 | 0 Views.