The relationship between the spot price and the expected future spot price whereby the futures price exceeds the expected future spot price. Normal contango is alternatively expressed as the relationship between forward prices and expected spot prices. The forward price is believed to exceed the expected spot price. The party on the short leg of the forward contract expects to earn a profit from the risks associated with the short position, whereas the party on the long side expects to lose from the long position in the same proportions.

In general situations (efficient markets), normal contango is a rare occurrence due to the fact that negative betas (or negative systematic risk) are, per se, rare occurrences. In inefficient markets, normal contango may result from overpricing: a given forward contract might be overpriced, as such producing negative ex-ante alpha to the buyer and positive ex-ante alpha to the seller. Normal contango arises if hedgers are net buyers of futures/ forward contracts and speculators are net sellers of the same.

By nature, normal contango cannot, unlike contango, be directly observed due to the inability to observe expected spot prices.