Contango - Encyclopedia

GEOGRAPHICAL NAMES

CONTANGO, a Stock Exchange term for the rate of interest paid by a "bull" who has bought stock for the rise and does not intend to pay for it when the Settlement arrives. He arranges to carry over or continue his bargain, and does so by entering into a fresh bargain with his seller, or some other party, by which he sells the stock for the Settlement and buys it again for the next, the price at which the bargain is entered being called the making-up price. The rate that he pays for this accommodation, which amounts to borrowing the money involved until the next Settlement, is called the contango.