Futures spreads are quoted as the difference in price between two contracts. Specifically, the futures price of the “near month” minus the “deferred month”. For example, let’s say you are looking at the Sept vs. Dec Corn Spread. Sept Corn is trading at $5.1375 and Dec Corn is trading at $5.0000.
Near Month – Deferred Month = Futures Spread Price
September Corn – December Corn = Sept/Dec Spread Price
$5.1375 – $5.0000 = $0.1375
In this example, with Sept Corn trading $5.1375 and Dec Corn trading at $5.0000, the spread is at 13.75 cents (premium to Sept Corn). The spread price is positive because the near month is trading over the deferred month. In the grain markets this is known as an “inverse market”. In the energy markets like crude oil, when the near months trade over the deferred, they refer to this as a market in “backwardation.”
Sept vs. Dec Spread Chart:
Spread prices can be negative. Let’s take Natural Gas as an example. We will use the same formula for determining the price by taking the near month and subtracting the deferred month. In this case we will look at October vs. December Natural Gas. Oct Natural Gas is trading at $4.000 and December Natural Gas is trading at $4.295.
Near Month – Deferred Month = Futures Spread Price
October Natural Gas – December Natural Gas = Oct/Dec Natural Gas
$4.000 – $4.295 = -$0.295
In this second example, with Oct NG trading at $4.000 and Dec NG trading at $4.295, the spread is at a negative 29.5 cents (premium to Dec Natural Gas). The spread price is negative because the near month is trading under the deferred month. In the energy markets this is known as a market in “contango.” In the grain markets like corn, when the near months trade over the deferred, they refer to this as trading at a “carry.”
Oct vs. Dec Natural Gas Chart:

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