What is contango?Contango
A market where futures (or later months) trade above spot (or nearer months).
Learn “contango” in an animated lesson
- Physical CommoditiesStorage, Transport and Cost of Carry
Physical goods need warehouse space and insurance, and they tie up money. The cost of carry sets the price gap between buying now and buying later.
- Futures BasicsBasis and Convergence at Expiry
The futures price isn't the same as the spot price, and the gap between them is the basis. As expiry approaches, the futures price moves toward spot.
- Futures BasicsRolling Futures Contracts
Futures expire. To hold for the long run, you close the near month and buy a later month before expiry, which costs money in contango.
- Hedging StrategiesThe Hidden Costs of Hedging: Rolling and Margin
Roll near-month futures to hedge for a whole year and the price risk is locked on paper, but every roll costs money and margin needs cash. A hedge can also die from cash flow.
Related terms
See how “contango” works for yourself with an animation you can drag and play.
Go to “Storage, Transport and Cost of Carry”