What is Continuous Futures Data and Back-Adjustment

What is Continuous Futures Data and Back-Adjustment

Back-Adjusted Continuous Futures

Our products are "Continuous Futures Data", and there are 2 variants:

  • Not back-adjusted
  • Back-adjusted (bk)

What is continuous future data?

Each future contract has an expiration date, so to create a future historical series is needed to concatenate contracts. There are different ways to concatenate futures contracts:

  1. at expiration
  2. when the next contract become more traded than the expiring one

We use the 2°method, so for example when CrudeOil-Aug24 will have a higher volume than CrudeOil-Jul24, the rollover will be made.

What is the difference between "Back-adjusted" and "Not Back-adjusted" continuous futures?

  • Not backadjusted: it is a simple concatenation of future contract's prices. It has price gaps due to rollovers, since future contracts with different expirations usually have a bit different prices.
  • Backadjusted (bk): in this variant the rollovers don't cause gaps in the series. To get this result, when we do a rollover:
    • we compute a ratio between the price of the expiring contract and the price of the new contract
    • we multiply the historical series by that ratio
    • we append to the series the prices of the new contract