Contango

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Contango describes the shape of a commodities forward curve where the spot price is lower than the forward price — especially one where the further into the future, and along the curve, you go, the higher the forward price gets. This implies that the commodity inquestion is expected to rise in price through time. In these days of growing inflation, that is the generally expected position. Contrast with backwardation, which is the opposite scenario.

Contango offers the opportunity for a carry trade for someone prepared to monkey around with spots and forwards.