The economy and the market
Contango
Definition
A futures curve where later months trade above nearer ones and above spot. VIX futures are in contango most of the time.
Example
Say spot VIX is 15, the one-month future trades at 17 and the two-month at 18.5. A fund holding the front contract keeps rolling into the pricier next one, and if spot stays at 15, each future tends to slide toward it before expiring: 17 to 15 is a loss of about 12% in a month. Repeated monthly, that roll cost is why long-VIX products tend to lose value over time.
Hypothetical numbers, for illustration only.
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