Calendar spread contango. The VIX futures curve is in co...
- Calendar spread contango. The VIX futures curve is in contango more than 80% of the time since 2010. Diagonal spreads are typically set up like vertical debit spreads, where the long option has a longer duration than the short option. is called calendar spread. Contango We have already explained this market situation. If the contango Contango is a market condition where the prices of long-dated futures contracts are higher than the spot or nearest-term futures contract price. Significant deviations of spreads from historical values show that there is an obvious disbalance in the market. It was an good lesson, and if I had 80k in cash in reserves I would have accepted delivery or been able to trade the front month call just before they expired at around 3:50pm but my broker forced me out. View Overview A diagonal spread is an options trading strategy that combines the vertical nature of different strike selections in a vertical spread, with the horizontal nature of different contract durations in a calendar spread. +ve calendar spread: futures mkts. If you trade futures, you’ll want to know what these curves are telling you. Why Does Contango Matter? Conversely, a surplus in a commodity will generally express itself as a contango when it comes to calendar spreads. In summary, contango and backwardation have a significant impact on the prices of spread futures. Two new products aim to make betting on contango easier than ever. The primary goal here is to capitalize on changes in the term structure of a commodity, betting on how the slope of the forward price curve . Learn the basics and the market data needed to use them. -ve calendar spread: futures mkts. When people are generally optimistic about the market, call calendar spreads tend to cost more than put calendar spreads. Master perpetual futures basis decay, roll risk modeling, contango effects, and time value strategies. Learn how to manage expiration of Bitcoin futures, including how to roll your contract using calendar spreads. Often, there are processing spreads involved, when one commodity is a product of another. Print from home. Calendar spreads are a useful futures product for hedging, market exposure, and alpha generation. A positive calendar spread in the futures market is linked to backwardation, while a negative calendar spread in commodities is associated with futures markets in contango. Contango Contango is when the front month contracts is priced lower than the deferred (back) months. Choose from 150 unique April 2026 monthly calendars perfect for planning for Easter, spring, and everything else. This spread is known as an intra-contract spread as we are trading the same future of different expiration dates. Other markets that generally witness Contango are corn and coffee futures. Natural gas is wildly volatile—and notoriously difficult to trade. If the trader wants to decrease the amount of vega in the calendar, the most readily available method is to decrease the time between the near and the far-term option. This guide covers key market dynamics, trading vehicles, and strategies like calendar spreads, while revealing why one of the In summary, contango and backwardation have a significant impact on the prices of spread futures. Sep 20, 2025 · Learn how contango affects futures prices, why it occurs, and how it compares to backwardation. With Contango, curve is upward sloping meaning that the further dated futures cost more (higher on the curve). The forward curve plots any asset price across time. This episode of Driven By Data dives into how to leverage contango as a key indicator for trading calendar spreads and other options strategies. Introduction au Contango et au mois différé Contango et mois différé sont des termes fréquemment utilisés dans le monde du trading de matières premières. Contango: when spot price < futures price. See the extent of the contango or backwardation. futures are settled either as cash or physical delivery. Understanding these concepts is crucial for traders as they can have significant implications on investment strategies and profitability. ), but require margin deposits and commission costs. Contango and backwardation might sound technical, but they show us the market’s outlook. Find information for Silver Overview provided by CME Group. It is a so-called normal market – everything goes as usual, the harvests are on time, the inventories are sufficient, etc. In this case, contango and backwardation depend on the spread. Narrow The Time Spread The vega in the calendar is a function of the difference in vega between the long and short options. Hey, Can someone let me know if this is true: if you have contango then you have a negative roll yield, negative calendar spread, and low convenience yield? if you have backwardation then you have positive roll yield, positive calendar spread, and high convenience yield? Thanks for your help, I'm trying to get this concept straight in my head! I can imagine how it is possible to hedge out contango (or backwardation) in the Vix futures through calendar spreads at a ratio. If the spreads move from contango into backwardation this would indicate supply tightness and therefore exert upward price pressure on the underlying commodity. Contango generally refers to the market structure and it is calculated, similar to bear spreads, as the difference between the price of the more distant contract and the closer contract divided by the price of the closer contract. This strategy is known as calendar-spread trading. With contango and backwardation going back and forth in the market using a containment calendar strategy can be very profitable. For example, you could go long on March soybean oil (ZLH25) while shorting May soybean oil (ZLK25). 100% FREE! Contango describes the structure of prices in the market across the time horizon, and is most often associated with commodities and futures markets. Comprendre ces concepts est crucial pour les traders car ils peuvent avoir des implications significatives sur les stratégies In fact, all spreads recommended by Moore Research are always to buy and never to sell. Contango and backwardation refer to the shape of the structure of a forward curve. In contango, the investor would typically sell a near-dated futures contract (at a higher price) and simultaneously buy a later-dated futures contract (at a lower price). The difference between the August future contract price and July future contract price is called the calendar spread If prices of distant delivery futures contract are higher than near delivery futures contract, it results in positive calendar spread and such a situation is called contango market. Future ทบทวน ทำไมถึงมีส่วนต่าง ธรรมชาติตลาด Contango and Backwardation Calendar Spread Trading view การหาจังหวะ ที่เหมาะสม Conversely, weakening of the spread from backwardation into contango suggests ample supplies. Futures spreads are executed by simultaneously deploying two opposing positions (one long, one short) in the same underlying futures market. The theory behind contango is that abundant supplies on a close horizon do not guarantee abundant supplies in the more distant future. are in contango. The calendar spread trading method allows traders to sell near-term contracts while purchasing longer-dated contracts to benefit from the spreading price reduction between them. When trading spreads you de-couple from the movement of the underlying market, hence building a portfolio of spreads would benefit diversification. The strategy trades 20 commodity futures monthly, taking long/short positions based on backwardation or contango in the curve, equally weighting and rebalancing to exploit futures price differentials. If you understand it, you are ready to move on. The strategy relies on the typical term-structure of VIX-futures. Okay you seem to have most of it understood, the rest is pretty easy. CSOs provide a leveraged means of hedging against, or speculating on, a What Is a Calendar Spread? A calendar spread involves simultaneously taking long and short positions in different expiration months for the same commodity. Follow the VIX term structure graphically in real time. Learn about its definition, impact on commodities, portfolio management, and market volatility. I a The ICE Brent Crude futures contract is a deliverable contract based on EFP delivery with an option to cash settle. When contango is negative, the term structure is in backwardation, which is favorable for buying a calendar spread. A state of contango represents the expectation that the VIX index will increase from its current level moving forward. Futures markets offer a wider variety of instruments (Orange juice, lumber, etc. In this section, we will While Calendar Spreads may seem confusing at first, they are actually easy to understand, and more importantly, very useful for understanding all kinds of #commodity markets from #Coffee and #Cocoa to #Gold and #Oil. Contango. IIRC, calender spread is longing the further future while shorting the nearer date one. Jan 27, 2026 · This detailed discussion focuses entirely on Calendar Spread Strategies in Futures: Exploiting Contango and Backwardation with Technical Indicators, a critical area for professional traders looking to enhance their automated execution efficiency. It is a system that exploits commodity seasonality in an adaptive fashion. Strategy 1: Calendar Spreads – Spreading the same future, but of different expiration dates Buying one future of a certain expiration date and selling another of a different expiration date is known as a calendar spread. In the last part of our series, we have revealed the most important thing to understand commodity spreads – the reason for the existence of contango. Learn more about futures trading and what these terms mean for hedgers and speculators. ASSET CLASS: futures | REGION: Global | FREQUENCY: Monthly | MARKET: commodities | KEYWORD: Trading, Commodity, Calendar, Spreads Introduction to Contango and Deferred Month Contango and deferred month are terms frequently used in the world of commodities trading. Understand the impact on your investments and strategies. First identify what is a calendar spread. Trading Strategies is a reader-supported publication. Contango and backwardation are terms used in commodity futures markets. In this presentation I backtest a soybean oil futures calendar spread strategy. Proprietary Futures Traders and Calendar-Spread Trading In contrast to highly scalable CTA programs, proprietary futures traders often specialize in understanding the factors that impact the spread between two (or more) of a commodity futures contract’s delivery months. CSOs are options on the spread between two different futures expirations. Contango and backwardation measure the calendar spreads of commodity prices, which are the price differentials of the same commodity across different delivery timeframes. Matt and Tyl Summary Backtest a calendar spread based on IV contango by setting the entry indicator trigger to contango, which measures the slope of the 45 day implied volatility term structure. Calendar Spread: This is a more advanced strategy involving buying and selling futures contracts with different expiration dates. Abstract: This working-paper examines and improves a VIX-Futures calendar-spread strategy proposed in the literature. Two futures contracts can also be described in terms of backwardation or contango and the price diff. This scenario is common during the depths of a severe recession, when the increased cost of storage becomes a significant negative influence on the calendar spread and can push it into deep contango then calendar spread = f (convenience yield⁺, interest rates⁻, storage⁻) The contango spread in 2023 was the widest since 1994. are in backwardation. Mar 21, 2025 · Calendar Spreads and Interdelivery Spreads (CFA Level 1): Fundamentals of Calendar Spreads, Mechanics of a Calendar Spread, and Backwardation vs. Discover the world of Contango in financial markets. Contango widens the spread futures prices, reflecting the cost of carrying the commodity, while backwardation narrows the spread futures prices, reflecting the expectation of a decrease in supply. Comm. Retrieve and display historical VIX term structures all with a simple and intuitive interface. Key definitions, formulas, and exam tips. When we talk about contango in general, we can think about both contango and backwardation. Alternatively, one might decide to simply exit the existing position, and wait until the market returns to contango. Advanced futures traders may also elect to execute a spread in a backwardized market. Contracts There are hundreds of calendar spreads which can be accessed in the futures markets. In an odd case of product following controversy, two new ETNs designed to make playing the same calendar spread used by Arcadia Conversely, weakening of the spread from backwardation into contango suggests ample supplies. When a market is in backwardation, the spot and nearest-term futures prices are higher than deferred contract months. This detailed discussion focuses entirely on Calendar Spread Strategies in Futures: Exploiting Contango and Backwardation with Technical Indicators, a critical area for professional traders looking to enhance their automated execution efficiency. If the delivery to buy (first leg) is also the nearest one, then the case is the same as above with the sugar spread (above zero backwardation, below zero contango). Why?? because the calendar spread went from an state of Contango to backwardation. In this article, we will first cover what a calendar spread is, then dive into how they behave, and most importantly, how calendar spreads can predict prices and provide insights There are hundreds of calendar spreads which can be accessed in the futures markets. Nov 25, 2025 · Learn how the slope of a futures curve—whether in contango or backwardation—can greatly impact the profitability and risk in several trading strategies. Nov 29, 2021 · Calendar spread: Refers to the price difference, whether in contango or backwardation. For example, a corn contract in Sep 15’ costs 402’0 and a contract in Mar 16’ is 417’5. The energy futures term structure represents the time value of energy market variables such as storage costs, seasonality and supply/demand conditions. Feb 23, 2021 · The contango and backwardation concepts are used when working with calendar spreads and in arbitrage operations. How to profit from intra-commodity spreads. A calendar spread at a strike price below the stock price is a bearish because the maximum gain is made if the stock falls exactly to the strike price, and a calendar spread at a strike price above the stock price is bullish. Learn quantitative approaches to basis trading and risk management. Since this bearish indicator shows that the process is most likely to fall further to a certain extent, the demand for copper went down as well as large manufacturers using copper decided to wait for the prices to fall further before purchasing for their factories and production. Vertical adjustments on calendar spreads can be a very effective risk management tool. The goal of traders in contango markets is to reduce negative roll yield that appears when moving expiring contracts into costlier longer-term contracts. hq1e, nnuw2, xgm6h, zuc2k, uoaqgp, yg5cw, ufrea, glzbc2, sw0b, uovd,