contango etymology

Etymology:

The term "contango" is derived from the Latin phrase "cum tango," which means "with touch."

Meaning:

In finance, contango refers to a situation where the futures price of a commodity is higher than the spot price. This means that the market is expecting the price of the commodity to increase in the future.

Origin:

The term "contango" originated in the 19th century during the trading of cotton in England. At that time, traders would buy cotton for immediate delivery (spot price) and sell it at a higher price for future delivery (futures price). This was done to take advantage of the expected increase in the price of cotton over time.

Here's how contango worked in practice:

• A trader would buy 100 bales of cotton for the spot price of £50 per bale.
• Simultaneously, the trader would sell these bales for future delivery (e.g., 6 months later) at a higher price of £55 per bale.
• If the price of cotton did increase as expected, the trader would make a profit by selling the bales at the agreed-upon future price.

The term "contango" stuck as a way to describe situations where the futures price of a commodity is higher than the spot price. This can occur for various reasons, such as:

• Storage costs: Traders may charge a premium for storing the commodity until the future delivery date.
• Inflation: The market may be pricing in expectations of future inflation, leading to a higher futures price.
• Supply and demand imbalances: A shortage of the commodity in the present can drive up the futures price.

contango relate terms

• continue

  Etymology Latin continuus uninterrupted continuous Meaning and Origin 1 Cont

• contain

  Etymology Latin continere Late Latin contēnere Meaning To hold or enclose s

• reprobate

  Etymology From Middle English reprouable c 1400 from Anglo Norman French reprouvabl

• patent

  Etymology The word patent originates from the Latin term patens meaning open or exp

• oppression

  Etymology The word oppression comes from the Latin word oppressio which means actio

• inimical

  Etymology Latin inimīcus enemy Proto Indo European h₃en h₁kó s uncongenia

• prophet

  Etymology Ancient Greek προφήτης prophētēs Latin propheta Meaning A

• orient

  Etymology The word orient originates from the Old French orient which itself derive

• checkmate

  Etymology The word checkmate is derived from the Persian phrase shāh māt شاه م

• flux

  Etymology The word flux is derived from the Latin word fluxus meaning a flowing

• fatigue

  Etymology Middle English fatigate from Latin fatigare to weary from fat stem of