A Historical Document: Mistaking the Birth Pangs of Capitalism for Its Death Throes


From Wikiopedia:

Contango - Wikipedia, the free encyclopedia: Origin of term

The term originated in mid-19th century England, and is believed to be a corruption of "continuation", "continue" or "contingent": (dictionary.com).

In the past on the London Stock Exchange, contango was a fee paid by a buyer to a seller when the buyer wished to defer settlement of the trade they had agreed. The charge was based on the interest forgone by the seller not being paid.

The purpose was normally speculative. Settlement days were on a fixed schedule (such as fortnightly) and a speculative buyer did not have to take delivery and pay for stock until the following settlement day, and on that day could "carry over" their position to the next by paying the contango fee. This practice was common before 1930, but came to be used less and less, particularly after options were reintroduced in 1958. It is still prevalent in some exchanges such as Bombay Stock Exchange where it is referred to as Badla.

This fee was similar in character to the present meaning of contango, i.e. future delivery costing more than immediate delivery, and the charge representing cost of carry to the holder.