Contango Backwardation Interview Guide
Contango backwardation interview guide covering definitions, storage, scarcity, roll yield, examples, and mistakes.
Candidates explaining futures curve shapes and roll yield.
Contango means deferred contracts are higher
A curve is in contango when later futures trade above nearby futures, often reflecting storage, financing, and carry costs.
Backwardation means nearby contracts are higher
Backwardation can occur when immediate supply is scarce or convenience yield is high relative to carry costs and deferred supply.
Concrete example
If near-term crude supply is tight, the front contract can rise above later contracts even when long-run price expectations are stable.
Roll yield depends on position and curve
Rolling long futures through contango can be costly, while backwardation can create positive roll effects under stable curves.
Common mistakes
Candidates often say backwardation predicts spot prices will rise. Curve shape is not a guaranteed price forecast or trading signal.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.