Convertible arbitrage

An investment strategy that exploits differences in the market price of convertible bonds and the market value of the underlying shares into the bonds are convertible. The anomaly can be exploited, for example, by selling the convertible short if it is selling at a premium to the underlying shares, while holding an equivalent long position in the shares.

In contango, the longer the maturity of the forward/futures contract, the higher the forward/futures price. See backwardation.