contango

Meanings

Noun

• The situation in a futures market where prices for future delivery are higher than prices for immediate (or nearer) delivery, indicating the expectation that the price of the underlying asset will go up.
• The amount by which prices for future delivery are higher than prices for near delivery.
• Fee paid by a buyer to the seller on settlement day when the buyer wishes to defer settlement until the next settlement day.

Verb

• To charge (a buyer) a fee to defer settlement until the next settlement day.

Related

Similar words

• forwardation

Opposite words

• backwardation

Origin

• The term originated in early-19th-century England, and is believed to be a corruption of continuation, continue or contingent. In the past on the London Stock Exchange, contango was a fee paid by a buyer to a seller when the buyer wished to defer settlement of the trade they had agreed. The charge was based on the interest forgone by the seller not being paid.