Calendar spreads
Every calendar spread is one segment of the futures curve.
A futures curve compares prices of the same market across different delivery months. When later contracts generally trade above nearby contracts, the curve is in contango. When nearby contracts generally trade above later contracts, the curve is in backwardation.
Why curve structure matters
Supply context
Curve shape can reveal how the market values immediate versus future delivery.
Seasonality
Recurring production and demand cycles can reshape the curve through the year.
What is contango?
Contango is a curve structure in which deferred futures contracts generally trade above nearby contracts. Carrying costs such as storage, insurance and financing can contribute to this relationship when near-term supply is adequate.
What is backwardation?
Backwardation occurs when nearby contracts generally trade above later contracts. This can happen when immediate supply is tight, near-term demand is strong or the market places a high value on having the commodity now rather than later.
See the current curve structure
Open the Forward Curve to compare active delivery months and identify rising, falling or mixed sections.
Open Forward CurveMixed curves are common
Real futures curves are not always uniformly rising or falling. One section can be in contango while another is in backwardation. That is why a label for the entire curve should not replace contract-by-contract analysis.
How curve structure affects spreads
A calendar spread measures the difference between two delivery months. If the local slope between those contracts changes, the spread changes. A steepening contango section, a flattening curve or a move into backwardation can all create materially different spread behavior.
Curve structure is context, not a trading signal
Contango does not automatically mean prices will fall, and backwardation does not automatically mean prices will rise. The curve describes relative prices across time. It should be combined with seasonality, historical dispersion and market-specific fundamentals.
A practical workflow
- Open the current forward curve.
- Identify the exact segment containing your two contracts.
- Determine whether that local segment is rising, falling or flat.
- Compare the same calendar spread across historical years.
- Check whether the historical pattern occurred under similar curve regimes.
Connect curve structure with seasonality
After reviewing the curve, test the exact month pair across historical seasonal windows.
Analyze the SpreadWhat the curve can tell you—and what it cannot
The curve can reveal where the market places value across time. It can show whether nearby supply appears relatively tight, whether carrying costs are being reflected and whether different delivery periods are priced differently. It cannot, by itself, tell you what the outright commodity price will do next.
That distinction is central to spread research. The same outright market can rise in contango, rise in backwardation, fall in contango or fall in backwardation.
A stronger curve-research workflow
- Identify the exact contract pair.
- Measure the local slope between those contracts.
- Inspect the neighboring curve segments.
- Compare the current structure with historical seasonal behavior.
- Check whether today represents an extreme regime.
This sequence prevents a broad curve label from replacing actual spread analysis.
Example: mixed curve structure
Imagine the front two contracts are backwardated because nearby supply is tight, while contracts farther out rise gradually because carrying costs dominate later months. Calling the entire market “backwardated” hides the fact that only the front segment behaves that way. A trader analyzing a farther-out calendar spread should focus on the local relationship instead.
Explore this cluster
What Is Contango?What Is Backwardation?Contango vs BackwardationFutures Forward CurveContango & Calendar SpreadsBackwardation & Calendar SpreadsHow to Read a Futures Curve
Frequently asked questions
Is contango bullish or bearish?
Not by itself. Contango describes the relationship between futures delivery months, not a directional forecast for the underlying market.
Is backwardation always caused by a shortage?
No. Tight nearby supply can contribute, but curve shape can also reflect demand, inventory, financing, convenience value and expectations.
Can a curve contain both contango and backwardation?
Yes. A mixed curve can have rising sections and falling sections at the same time.
Why does curve structure matter for calendar spreads?
A calendar spread is one segment of the curve, so changes in the curve directly change the relative value between the two delivery months.
Research the curve and the spread together
Use the Forward Curve for current structure, then compare the same contract relationship in historical seasonal data.
Open Forward CurveFutures trading involves substantial risk. Curve structure and historical patterns are descriptive context, not guarantees of future results. This material is for education and research only and is not investment advice.