how does contango affect commodity exchange traded funds etfs 
investors in exchange traded funds etfs must understand how contango can affect certain commodity based etfs specifically if a commodity etf invests in commodity futures contracts as opposed to physically holding the commodity in question that etf may be forced to replace or continuously roll over its futures contracts as its older contracts expire if the commodity in question is subject to contango then this would lead to a steady rise in the prices being paid for these futures contracts over the long run this can significantly increase the costs borne by the etf placing a downward drag on the returns earned by its investors the bottom linecontango is a futures market occurrence marked by futures contract prices rising above spot prices it means that traders and investors anticipate an increase in prices in the coming months the opposite of contango is backwardation when futures prices are lower than spot prices futures contracts are inherently speculative but contango and backwardation are standard market conditions because investors have different views about the future the significant difference for investors then is how to trade during these conditions 