How Does Contango Affect the Returns of a Passive Long-Only Futures Investor? ▴ Learn

How Does Contango Affect the Returns of a Passive Long-Only Futures Investor?

Contango negatively affects the returns of a passive long-only futures investor who must "roll" their position from an expiring contract to the next contract month. Since the next contract is priced higher than the expiring one (due to contango), the investor sells low and buys high, incurring a loss on the roll.

This continuous negative roll yield can significantly erode the total return over time, even if the spot price remains flat.

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