Futures Curve

The futures curve is a graphical representation of the prices of futures contracts for a specific asset at different expiration dates. It provides a visual overview of market expectations regarding the future price of the asset.

A curve that slopes upward indicates contango, while a downward-sloping curve indicates backwardation. This tool is indispensable for traders to analyze the cost of carry and to identify trends in market sentiment.

By studying the shape and shifts of the curve, traders can make informed decisions about hedging, speculation, and arbitrage. The curve is dynamic and changes constantly in response to new information and market conditions.

It is a core component of derivative market analysis.