Definitions

from Wiktionary, Creative Commons Attribution/Share-Alike License

  • n. The situation in a futures market where prices for future delivery are higher than prices for immediate (or nearer) delivery.
  • n. The amount by which prices for future delivery are higher than prices for near delivery.
  • n. Fee paid by a buyer to the seller on settlement day when the buyer wishes to defer settlement until the next settlement day.

from the GNU version of the Collaborative International Dictionary of English

  • n. The premium or interest paid by the buyer to the seller, to be allowed to defer paying for the stock purchased until the next fortnightly settlement day.
  • n. The postponement of payment by the buyer of stock on the payment of a premium to the seller. See Backwardation.

from The Century Dictionary and Cyclopedia

  • n. On the London stock exchange, the charge made by a broker for carrying over a bargain to the next fortnightly settling-day; the consideration paid by the buyer of stock for the privilege of deferring settlement until the next settling-day.

Etymologies

The term originated in mid-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. (Wiktionary)

Examples

  • That increase from contract to contract is called contango, and it can cut into fund returns.

    Playing With Your Food

  • In commodities lingo, the trading pattern is called contango.

    Avoiding a Haircut on Crude

  • However, the company on Monday admitted that like other independent refiners, second-quarter results will be pressured by low margins amid increased crude costs and a contraction in a trading benefit known as contango, which in the first quarter helped earnings.

    Western Refining Increases Size of Stock, Note Offering

  • A key dimension to continued pressure for higher prices is coming from various commodity funds trying to maintain a near-term contango in the futures market.

    How High Will It Go?

  • George Gero, vice president with RBC Capital Markets Global Futures, said September copper has a premium over the next-most-active July contract beyond normal "contango" -- where farther-out prices are higher because of costs including storage.

    Copper Rises 3% as Dollar Falls

  • The forward curve for Nymex crude prices currently slopes upward -- known as a "contango" -- and is extraordinarily steep.

    OPEC's Mountain to Climb

  • The crude futures market is now in what oil traders call a "contango" - in which oil delivered in the next few weeks is cheaper than in the following months.

    Market News

  • This leaves ETFs more prone to so-called contango effects, as well as vulnerable to tax hits and front-running — when traders can jump ahead of expected trades to profit from the subsequent demand.

    Commodities Investors Favor Mutual Funds Over ETFs

  • Many advisers recommend against oil ETFs, which suffer from a market malady known as "contango."

    Mining the Scarcity Boom

  • The expiring ones are usually worth less than the new ones—a condition known as "contango"—so they lose money with each roll.

    Did 'Volatility Funds' Deliver?

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