• Contango is a situation where the futures price of a commodity is higher than the spot price.
• In all futures market scenarios, the futures prices will usually converge toward the spot prices as the contracts approach expiration.
• Advanced traders can use arbitrage and other strategies to profit from contango.
• Contango tends to cause losses for investors in commodity ETFs that use futures contracts, but these losses can be avoided by purchasing ETFs that hold actual commodities.