Contango

Contango describes a futures market where contracts for later delivery trade at progressively higher prices compared to the spot price, creating an upward-sloping futures curve. This is considered the "normal" state for most commodity markets because it reflects the cost of carry — including storage, insurance, and financing costs. For example, storing physical oil for future delivery incurs real costs that are priced into futures. Contango creates a negative "roll yield" for investors who hold futures-based ETFs, as they must sell expiring lower-priced contracts and buy more expensive longer-dated ones. This roll cost can significantly erode returns in commodities and VIX futures products over time, a phenomenon sometimes called "contango bleed."