Time spreads involve trading the price difference between contracts of the same underlying asset with different expiration dates. Also known as calendar spreads, these strategies profit from changes in the relationship between near-term and deferred prices rather than absolute price direction. Time spreads often exhibit lower volatility than outright positions.

Time spread relationships reflect storage costs, convenience yields, seasonal patterns, and supply-demand expectations across different time periods. These spreads can indicate market backwardation or contango conditions while providing insights into inventory levels and market tightness. Understanding time spreads helps assess market structure and relative value opportunities.

Real-world example: A trader buys March natural gas futures and sells April natural gas futures, profiting when the spread narrows from $0.50 to $0.25 per MMBtu as winter heating demand increases near-term prices relative to spring shoulder season prices.