Contango

Discussion in 'Energy Futures' started by rcarlton88, Jan 26, 2012.

  1. Can someone explain to me in plain English what a contango is (as well as backwardation)?

    I have been surfing around the internet/wikipedia/whatever else and the explanations all leave me needing a bit more.

    Does anyone know it well enough to describe it to me so I understand?

    Thanks in advance!
     
  2. Contango = near term prices are lower than long(er) term prices.

    Upward progression: Jan @ 100, Feb @ 105, Mar @ 110.

    Backwardation = near term prices are higher than long(er) term prices.

    Downward progression: Jan @ 110, Feb @ 105, Mar @ 100.
     
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