Saturday, April 14, 2007

Simple explanation of "contango"

Contango is a complicated concept.

That's why I was struck by the following sentence: "The reason is a futures-market phenomenon known as 'contango' -- the industry's way of saying near-term futures are cheaper than those the next month out."

This sentence appeared in "Oil-ETF Investors Are Stung by 'Contango,' " an April 10 Wall Street Journal article by Ian Salisbury.

You can read more definitions of contango.

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