Contango

Commodities & Futures

Contango is a situation where the futures price of a commodity is higher than the expected spot price at contract maturity. In contango, futures curves slope upward — contracts further out are priced higher than near-term contracts.

Contango is the silent tax on commodity ETF investors. When an ETF rolls expiring contracts into the next month, it sells the cheap near-term contract and buys the more expensive future-dated one — eroding returns over time even if spot prices are flat.