Commodities · Core
Contango
Contango is a futures curve that rises with tenor — deferred contracts richer than nearby, often a storage and rate story.
Definition
F(T) > F(t) for T > t. Full carry is rates + storage − convenience yield. Persistent contango taxes a long-only roll. WTI April 2020 was the violent version.
Why it matters
Commodity index returns are mostly roll. Contango is a headwind; backwardation is a tailwind.
Case
Oil in 2015–16: inventory glut, deep contango, tankers as storage. The curve paid you to hold barrels and charged you to hold the front future.
How to read it
Split calendar spread vs spot. A long ETF in structural contango is a short-roll product.
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