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Contango: CNBC Explains

CNBC Explains
Thursday, 16 Jun 2011 | 8:59 AM ET
Contango (Part II): CNBC Explains
Contango may seem daunting to those new to the market or unfamiliar with futures contracts, but it doesn't have to be. Simply put, contango occurs in a market when futures prices for a commodity are greater than the current spot price. Severe Contango can send distinct signals to the market. Salman Khan illustrates.
Contango (Part I): CNBC Explains
Contango may seem daunting to those new to the market or unfamiliar with futures contracts, but it doesn't have to be. Simply put, contango occurs in a market when futures prices for a commodity are greater than the current spot price. Salman Khan illustrates.

Contango may seem daunting to those new to investing or unfamiliar with futures contracts, but it doesn’t have to be. Simply put, contango occurs in a market when futures prices for a commodity are greater than the current spot price. The idea is that, eventually, these prices will converge. Salman Khan of the Khan Academy illustrates.

From the first video, you’ll understand:

  • What it means to say a market is “in contango”
  • The rationale behind contango and why you may see it in the market


From the second video, you’ll understand:

  • What severe contango means and how traders take advantage
  • Whether severe contango is a bullish or bearish signal for individual commodities

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