TickSurfers Backwardation Indicator
Description
Backwardation (or premium) occurs in futures and options when the contract with the nearest expiration is trading for more than the contract with a further expiration. This is more notable in commodities, where it is expected that contracts that expire further out into the future trade for more than the nearby contract, given that the supplier needs to keep the inventory for longer and thus incur carrying costs. When this regular scenario reverses, it is said to be in a premium. It tends to occur when the demand for the commodity is rising rapidly and producers want the product much sooner, causing prices of the commodity to rise. As such, this only works for bullish signals.
Features & Settings
If you’re familiar with the concept of backwardation, you know how difficult it is to set your charts up correctly to calculate the spread between contracts. This indicator does all the work without having to add secondary data sets on your charts. Furthermore, you don’t have to worry about switching out the contracts when they are near expiration.
Settings are default in the indicator according to how it’s typically used. However, you may adjust the type of contract. Features may vary between platforms.
Platforms
TickSurfers Backwardation Indicator is available for the following platforms:
