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Contango is a situation in which the futures price (or forward price) of a commodity is higher than the expected spot price of the contract at maturity. [1] In a contango situation, arbitrageurs or speculators are "willing to pay more [now] for a commodity [to be received] at some point in the future than the actual expected price of the ...
The concept started to be used by oil traders in the market in early 1990. [2] But it was in 2007 through 2009 that the oil storage trade expanded. [6] Many participants—including Wall Street giants, such as Morgan Stanley, Goldman Sachs, and Citicorp—turned sizeable profits simply by sitting on tanks of oil. [5]
Futures prices tend to be in contango; The volatility of spot and futures prices tend to be low, and futures premiums rise to the full cost of storage; When supplies are tight, and purchasing managers build production inventory levels to ensure availability, Futures prices tend toward backwardation
The 30th edition (1996) was renamed CRC Standard Mathematical Tables and Formulae, with Daniel Ian Zwillinger as the editor-in-chief. [2] The 33rd edition (2018) was renamed CRC Standard Mathematical Tables and Formulas. [3]
The situation where the price of a commodity for future delivery is higher than the expected spot price is known as contango. Markets are said to be normal when futures prices are above the current spot price and far-dated futures are priced above near-dated futures.
The roll yield is the difference between the profit or loss of a futures contract and the change in the spot price of the underlying asset of that futures contract. Unlike fixed income or dividend yields, a roll yield does not provide a cash payment, and may not be counted as a profit in certain cases if it accounts for the underlying asset's cost-of-carry.
Flux F through a surface, dS is the differential vector area element, n is the unit normal to the surface. Left: No flux passes in the surface, the maximum amount flows normal to the surface.
Above anon comment is relevant. The definition of contango in Wikipedia as of 22th of May 2008 13:06 (GMT+2) is in confusion with the academic definition of contango for futures commodity markets. Contango refers to falling prices of contracts of certain maturity over their lifetime. It can only be assessed as time goes by.