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contango

Pronunciation: /kənˈtæŋɡoʊ̯/

The English word “contango” has 4 meanings listed here.

noun

  1. 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.
  2. The amount by which prices for future delivery are higher than prices for near delivery.
  3. Fee paid by a buyer to the seller on settlement day when the buyer wishes to defer settlement until the next settlement day.

verb

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

Etymology

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.

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