> For the complete documentation index, see [llms.txt](https://guide.laevitas.ch/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://guide.laevitas.ch/concepts/contango.md).

# Contango

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A market is in contango when the futures contracts are trading at a premium to the spot price. 

When the spot price is lower than the futures price, it generates an upward sloping forward curve. 

Volatility is normally in contango. 

Contango is the options and futures market way of saying that volatility further out in time is higher than volatility in the near-term.
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### Positive Basis

When contango occurs, there is positive basis whereby the futures price is higher than the current spot price.

Basis is the difference between the futures price and the spot price of the same asset. Basis can be calculated to the near future, and may represent different time periods. The below calculation expresses basis as a nominal value:\
\
Basis (B) = Future Price (F) - Spot Price (S)

In a healthy growth market condition, a 5%–15% annualized premium (basis) is expected.