A state in which the price of a futures contract is higher than the eventual or expected spot price of the underlying commodity or security.
A pricing situation in which the prices of futures contracts are higher the further out the maturities are. This is the normal pricing pattern because carrying charges such as storage, interest expense, and insurance have to be paid in order to hold onto a commodity. It is the opposite of backwardation.
2003: Normally new buyers would go after the March silver contract, especially with such a small contango. "” Bill Murphy, Kitco Bullion Dealers.
Origin of contango
- Probably alteration of 19th-century stock-exchange jargon continuation the carrying over of an account until the next designated date of settlement
From American Heritage Dictionary of the English Language, 5th Edition
- 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.