A market condition where futures prices are higher than the expected spot price of the underlying asset.
Contango describes a situation where the futures price of an underlying asset is higher than its current spot price, typically reflecting the cost of carry such as interest and storage. In equity index futures, mild contango is normal and reflects financing costs. Traders watch shifts between contango and backwardation as a signal of changing sentiment, since a sudden move toward backwardation can indicate rising near-term demand or bearish positioning.
Got a question or a feature you wish existed? Drop it in our Telegram community, the Stolo team is right there reading every message.