Contango

Okay kiddo, let me explain contango to you. Imagine you love chocolate and you want to have some every day. You go to the store and buy a big box of chocolate bars for a month. But the store owner tells you that the chocolate prices will be different each day for the next month.

Now, if the chocolate prices go up each day, you would be very happy because you could sell the chocolate bars you bought for a higher price than what you paid for them. This is called "backwardation."

But if the chocolate prices went down each day, you would be sad because you would have to sell the chocolate bars you bought for a lower price than what you paid for them. This is called "contango."

Contango is when the future price of goods is higher than the current price. So, in our chocolate example, if you had to buy chocolate every day for the next month, you would have to pay more for it than what you paid for your big box of chocolate at the beginning of the month.

This often happens with commodities like oil or gas. For example, if an oil company thinks the price of oil will be higher in the future, they might buy contracts to receive oil at that higher price. But if the price of oil falls instead, the company will end up paying more for the oil than what it is currently worth.

I hope that helps you understand contango, kiddo!