(function(){
var COOKIE_NAME = 'menthorq_utm_params';
var LS_KEY = 'menthorq_utm_params';
var UTM_KEYS = ['utm_source','utm_medium','utm_campaign','utm_term','utm_content','utm_id'];
var CLICK_ID_KEYS = ['gclid','fbclid','msclkid','ttclid'];
var COOKIE_DAYS = 30;// Read UTM parameters and click IDs from current URL
var params = new URLSearchParams(window.location.search);
var trackingData = {};
var hasData = false;
var allKeys = UTM_KEYS.concat(CLICK_ID_KEYS);
for (var i = 0; i < allKeys.length; i++) {
var val = params.get(allKeys[i]);
if (val) {
trackingData[allKeys[i]] = val;
hasData = true;
}
}if (hasData) {
// Fresh tracking data found in URL — store it (overwrites previous attribution)
trackingData.captured_at = new Date().toISOString();
setCookie(COOKIE_NAME, JSON.stringify(trackingData), COOKIE_DAYS);
try { localStorage.setItem(LS_KEY, JSON.stringify(trackingData)); } catch(e) {}
return;
}// No tracking params in URL — check if cookie exists
if (getCookie(COOKIE_NAME)) return;// Cookie is missing (expired or first visit) — try to restore from localStorage
try {
var stored = localStorage.getItem(LS_KEY);
if (stored) {
var parsed = JSON.parse(stored);
if (parsed && (parsed.utm_source || parsed.gclid || parsed.fbclid || parsed.msclkid || parsed.ttclid)) {
setCookie(COOKIE_NAME, stored, COOKIE_DAYS);
}
}
} catch(e) {}// Helper: set cookie
function setCookie(name, value, days) {
var expires = new Date(Date.now() + days * 864e5).toUTCString();
var cookie = name + '=' + encodeURIComponent(value) + ';expires=' + expires + ';path=/;SameSite=Lax';
if (location.protocol === 'https:') cookie += ';Secure';
document.cookie = cookie;
}// Helper: get cookie value (returns empty string if not found)
function getCookie(name) {
var match = document.cookie.match(new RegExp('(?:^|; )' + name + '=([^;]*)'));
return match ? decodeURIComponent(match[1]) : '';
}
})();
var breeze_prefetch = {"local_url":"https://menthorq.com","ignore_remote_prefetch":"1","ignore_list":["/account/","/login/","/thank-you/","/wp-json/openid-connect/userinfo","wp-admin","wp-login.php"]};
//# sourceURL=breeze-prefetch-js-extra
How the Futures Price Curve Shapes Trading Strategies
The futures price curve offers critical insight for traders assessing how prices evolve over time. This is especially important in commodities like Crude Oil (CL), where the structure of the curve reflects market expectations, volatility conditions, and the impact of different expiration dates. Understanding the futures price curve can meaningfully inform both short-term trades and longer-term strategic positioning.
What Is the Future Price Curve?
A futures price curve, also known as a term structure, plots the prices of futures contracts for a commodity across various expiration dates. Traders use this curve to analyze whether the market is in contango or backwardation, helping to inform decisions regarding holding or entering positions.
Contango: This occurs when the futures prices are higher than the spot price, signaling that the market expects the price of the commodity to increase over time.
Backwardation: This is when futures prices are lower than the spot price, indicating that traders expect the price of the commodity to decrease.
The future price curve is valuable because it shows how market participants expect prices to behave as contracts near expiration. It reflects the relationship between spot prices and futures prices over different timelines and can indicate the level of confidence or uncertainty in the market.
Understanding the Futures Price Curve
Let’s use this chart as an example, we see the future price curve for Crude Oil (CL) dated January 31, 2025. Several key features are evident:
Price Movement Over Time: The curve shows a decline in price as the expiration date moves further out, as evidenced by the color-coded lines.
Green Line (Today’s Price Curve): Represents the price trajectory as it stands at the current moment, offering insight into how the market perceives the future prices of Crude Oil.
Yellow Line (Yesterday’s Price Curve): This shows the market’s previous outlook and can be compared with the green line to understand how expectations have shifted over time.
Red Line (5 Days Ago): This line displays how the market viewed the future prices five days ago, offering historical context for current trends.
Blue Line (1 Month Ago): This offers a broader historical perspective on how expectations have evolved over the past month.
What’s crucial here is that each line represents the price curve at different points in time. By comparing them, a trader can analyze changes in market sentiment, price and volatility. For instance, if the price is consistently moving downward on the curve as expiration dates extend, it might indicate expectations of lower future prices in Crude Oil. In this particular case, the CL price is in backwardation.
How Traders Can Use the Future Price Curve
Traders can use the future price curve to gain insights into the market sentiment for Crude Oil and other commodities. The main strategy for leveraging the price curve is to:
1. Identify Trends: By looking at the change in future prices (across different time periods) and their relationship with the spot price, traders can identify whether the market is in contango or backwardation.
Contango: If the curve shows a steady increase in price as the contract dates extend, it may be an indicator of an expected increase in Crude Oil prices. Traders may choose to hold long positions in the commodity or explore options strategies that benefit from rising prices.
Backwardation: If the futures price is lower than the spot price and the curve shows a downward slope, this signals expectations of a decrease in Crude Oil prices. Traders may choose to take short positions or adjust their risk exposure accordingly. Or this is a situation where the market has a positive roll, so strategies that roll each month benefit.
2. Manage Risk with Expiry Dates: The futures price curve also helps traders gauge the level of risk associated with positions. For instance, holding a long position in Crude Oil with an expiration in six months can expose a trader to more risk if the market is in contango. However, shorter-dated contracts might limit some of that risk, depending on the specific circumstances.
3. Timing Entry and Exit: The future price curve’s movement can also help determine the best times to enter or exit the market. If the market is in contango and futures prices are rising steadily, it may be more favorable to enter long positions in Crude Oil at an early stage. Alternatively, in a backwardated market, it may be wise to take profits as prices reach the peak of their downward trajectory.
Case Study: Crude Oil Futures (CL)
Consider the Crude Oil market as an example. A trader might look at the current future price curve to determine whether it is in contango or backwardation.
Scenario 1: Market in Contango: If the trader notices that the future price curve for Crude Oil is showing a steady increase in price over the next few months (as shown by the green, yellow, and red lines trending upwards), this could signal that the market expects rising prices. The trader could then opt to take a long position on Crude Oil Futures.
Scenario 2: Market in Backwardation: If, instead, the trader notices a downward slope with lower future prices compared to the spot price (indicated by a negative slope in the price curve), the market may expect Crude Oil prices to fall. The trader could then consider shorting Crude Oil futures to benefit from the expected decline in prices.
Case Study: Calendar Spreads with Options.
A calendar spread is an options strategy that involves buying and selling options of the same underlying asset at the same strike price but with different expiration dates. This strategy is typically used to capitalize on time decay and volatility changes. Traders can use calendar spreads to take advantage of market trends like contango and backwardation, depending on the price curve’s shape and the market’s expectations.
Calendar Spreads in Contango
When the market is in contango, futures prices are expected to rise over time, as seen in the upward-sloping forward price curve. This environment can be ideal for calendar spreads, particularly when a trader expects volatility and price increases in the future. In this scenario:
Sell short-term options: You can sell short-term options (closer expiration dates), as these options lose value quickly due to time decay.
Buy longer-term options: Simultaneously, you buy longer-term options (further expiration dates), which should benefit from the rising price of the underlying asset over time.
The trader can profit as the value of the short-term options decays, while the longer-term options may increase in value, reflecting the market’s expectation of higher prices in the future.
Calendar Spreads in Backwardation
In a backwardation market, future prices are lower than the spot price, suggesting that prices are expected to decline. This could occur when the market anticipates a price drop, perhaps due to a supply glut or a sharp decrease in demand. In this situation:
Sell longer-term options: Traders sell longer-term options, which have more time value, expecting them to lose value faster as the market expects prices to decrease.
Buy short-term options: You buy short-term options that are positioned closer to the current market price, benefiting from any near-term price spike or volatility before the market eases.
In a backwardation market, the trader could benefit from a near-term price spike, while the longer-term options lose value due to the overall expectation of declining prices.
Conclusion
The future price curve is an essential tool for traders looking to analyze the market sentiment and make informed decisions based on price trends. By evaluating the slope and shape of the curve, traders can determine whether the market is in Contango or Backwardation, giving them a deeper understanding of price movements and helping them time their positions better.
For futures traders or option traders that look at futures, this tool is especially powerful as it allows traders to align their strategies with the expectations embedded in the market’s pricing. By combining the future price curve with other technical indicators and trading strategies, traders can effectively manage their portfolios and maximize their trading potential.
Join us today
Access daily Market Research and our interactive Dashboard. Make better trading decisions.
