Derivatives & Risk

What is the difference between contango and backwardation?

Contango and backwardation describe the relationship between futures prices and spot. In contango, futures trade above spot, often reflecting carrying costs or expectations of a higher future price. In backwardation, futures trade below spot, signaling near-term demand or bearish expectations. For example, a future at 62,000 against a 60,000 spot is contango; a future at 58,000 is backwardation. The shape of this curve drives funding rates and the cost of rolling positions. Reading the curve informs positioning but does not predict outcomes, and acting on it carries risk.

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