Futures Curve
The graph of futures prices across successive delivery months for a commodity, revealing whether the market is in contango or backwardation.
The futures curve plots the prices of futures contracts with the same underlying commodity across increasing expiration months. Its shape tells traders critical information about supply-demand expectations and storage economics.
An upward-sloping curve (higher prices for deferred months) is contango — the normal state for storable commodities. A downward-sloping curve (higher prices for near months) is backwardation, signalling tightness in the physical market.
The curve can be kinked, humped, or mixed — for example, the front end in backwardation while the back end slopes gently upward. Spread traders systematically exploit distortions in curve shape.
Related Terms
Backwardation
A futures market where near-term contracts trade at a premium to deferred contracts, generating positive roll yield and signalling near-term supply tightness.
AdvancedCarry / Cost of Carry
The net cost of holding a physical commodity position — storage, insurance, and financing minus any income or convenience yield.
AdvancedCommodity
A raw material or primary agricultural product that is interchangeable with others of the same grade and traded on organized exchanges.
BeginnerCommodity Index (GSCI / BCOM)
A rules-based basket of commodity futures — the S&P GSCI is production-weighted and energy-heavy; the Bloomberg Commodity Index (BCOM) is diversified with per-commodity caps.
AdvancedContango
A market structure where futures prices are higher than the current spot price, creating negative roll yield for long futures holders.
AdvancedConvenience Yield
The implicit benefit of holding physical inventory of a commodity rather than a futures contract — what justifies backwardation.
AdvancedRoll Yield
The gain or loss generated when rolling a futures position from an expiring contract into the next one, driven entirely by the shape of the futures curve.
AdvancedSpot Price
The current market price at which a commodity can be bought or sold for immediate delivery.
BeginnerSpot-Futures Basis
The difference between the spot price and a futures price for the same commodity — the numerical expression of carry, storage, and convenience yield.
IntermediateSpread Trade (Commodities)
A trade that goes long one commodity contract and short a related one — exploiting price relationships between grades, delivery months, or related products.
Intermediate