Contango Definition

Learn more about Contango

Contango refers to a situation in the futures market where the futures price of an asset is higher than its spot price. In the context of exchange-traded funds, or ETFs, contango commonly arises when the fund invests in futures contracts. Investors may experience diminished returns due to the fund buying more expensive futures contracts to maintain its strategy. This can lead to an erosion of value over time as contracts are rolled forward. Contango is a crucial consideration for ETF investors, impacting performance and highlighting the importance of understanding the fund's underlying assets and the structure of its investment strategy.

Related Terms

Backwardation, Futures