Skip to content
GetProfitable
Search
Dictionary

Continuous contract

A synthetic price series that stitches successive futures months together so a chart can show years of history in one line.

No single futures contract lives long enough to chart. Data vendors splice them: show the front-month until a chosen roll-date, then switch to the next month. The result is a chart, not a tradeable instrument.

The splice leaves a seam. Unless the series is back-adjusted, there is a jump at every roll equal to the spread between the two months, and long-term support levels drawn across that seam are fiction.

Example: a raw continuous crude series rolling from a $78 expiring month into an $80 next month shows a $2 gap that nobody ever traded. Over ten monthly rolls in contango the chart accumulates $20 of gaps.

Related: back-adjustment, roll-date, front-month, contango, gap

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Contango and backwardationTwo futures curves against contract expiry: one rising above spot, one falling below it.The same commodity, priced for delivery at different dates.78.0076.0074.0072.0070.00Futures pricespot+1m+2m+3m+4m+5m+6mMonths until the contract expiresspot price74.00CONTANGOlater contracts cost more than spotBACKWARDATIONlater contracts cost less than spot
Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.

Educational only, not advice. Spotted an error? Post in Site Feedback.