Step 1: order contracts by delivery month
A proper futures curve should show active contracts in chronological order, from the nearest delivery month to farther-out months.
Step 2: inspect the slope
Rising sections indicate local contango. Falling sections indicate local backwardation. Flat sections show relatively small differences between adjacent months.
Step 3: focus on your two contracts
If you are analyzing a December–May spread, the most relevant information is the slope between those two contracts and the contracts in between.
See the current curve structure
Open the Forward Curve to compare active delivery months and identify rising, falling or mixed sections.
Open Forward CurveStep 4: quantify the differences
Do not rely only on the visual shape. Compare the actual price difference between adjacent contracts to see where the curve is steepest.
Step 5: check whether the curve is mixed
A curve may rise in one section and fall in another. Avoid forcing the entire structure into one label if different segments tell different stories.
Step 6: add historical context
Once you understand the current curve, open the seasonality view for the exact calendar spread. Compare the current structure with recurring historical behavior and individual years.
Connect curve structure with seasonality
After reviewing the curve, test the exact month pair across historical seasonal windows.
Analyze the SpreadRead the curve in layers
Start with the overall shape, then move to local segments. A curve that looks gently upward overall may contain one very steep pair of adjacent contracts. That local kink can be more important to a calendar-spread trader than the broad label “contango.”
Next quantify the price differences. Visual slope can be deceptive when axes or contract spacing differ. The actual month-to-month changes reveal where the market is assigning the largest time premium or discount.
Common curve-reading mistakes
| Mistake | Better approach |
|---|---|
| Labeling the whole curve from one pair | Inspect every segment |
| Assuming slope predicts direction | Treat it as relative time pricing |
| Ignoring contract liquidity | Check whether quoted months are actively traded |
| Ignoring history | Compare the current shape with prior regimes |
Explore this cluster
Frequently asked questions
Is contango bullish or bearish?
Not by itself. Contango describes the relationship between futures delivery months, not a directional forecast for the underlying market.
Is backwardation always caused by a shortage?
No. Tight nearby supply can contribute, but curve shape can also reflect demand, inventory, financing, convenience value and expectations.
Can a curve contain both contango and backwardation?
Yes. A mixed curve can have rising sections and falling sections at the same time.
Why does curve structure matter for calendar spreads?
A calendar spread is one segment of the curve, so changes in the curve directly change the relative value between the two delivery months.
Research the curve and the spread together
Use the Forward Curve for current structure, then compare the same contract relationship in historical seasonal data.
Open Forward CurveFutures trading involves substantial risk. Curve structure and historical patterns are descriptive context, not guarantees of future results. This material is for education and research only and is not investment advice.