Contango
Definition
What is Contango?
A futures-curve condition in which longer-dated prices exceed the spot priceThe current market price for immediate or near-immediate delivery of an asset. or nearer contracts.
Example in practice
How This Looks in Practice
A commodity fundA fund that gains exposure to commodities or commodity-related securities. loses roll yieldThe return created when an expiring futures contract is replaced with a later contract at a different price. while repeatedly buying more expensive futures.
Keep learning
Related Terms
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.