Let’s assume that the futures contract for houses in Mumbai is trading on the stock exchange. Currently contracts are open for July expiry (near month), August expiry (mid month) and September expiry (far month). The difference between the August future contract price and July future contract price is called the calendar spread

If prices of distant delivery futures contract are higher than near delivery futures contract, it results in positive calendar spread and such a situation is called contango market. For example in the above example if the price of August futures is higher than the price of July futures, it will be a contango market. Conversely if in the above example, if the price of July futures contract were higher than price of August futures contract, it would result in negative spread and is called backwardation.