Futures data
Continuous Futures: The Roll Is Part of the Strategy
A smooth historical series can hide a chain of contract choices, adjustments, and executable roll decisions.
Working definition
A continuous futures series is a research representation assembled from expiring contracts; it is not itself a directly tradable instrument.
01
Every continuous series embeds policy
Selecting the front contract by calendar date, volume, or open interest can produce different histories. Back-adjusting removes visible price gaps but changes historical levels and may alter percentage returns if applied carelessly. Ratio adjustment, Panama adjustment, and unadjusted splice methods answer different research questions.
The series construction rule should be frozen with the strategy. If the rule changes after seeing performance, the data pipeline becomes another parameter search.
02
Research returns and trade returns must reconcile
A signal may be calculated on an adjusted series, while P&L should be generated from the actual contracts held. On roll dates, the backtest must close one instrument and open another with the relevant spread, slippage, multiplier, margin, and session convention. Treating the adjusted series as the traded price can create returns that no order could realize.
- Record the active contract for every observation.
- Separate signal construction prices from execution prices.
- Include roll turnover and costs in the ledger.
- Stress alternative roll windows and liquidity triggers.
03
Carry can be signal or stitching artifact
Term-structure strategies are especially sensitive to how the curve is sampled. Settlement timing, stale contracts, delivery effects, and holiday calendars can change measured carry. A credible report shows contract-level evidence around rolls and confirms that the result survives a reasonable neighboring convention.
Practical takeaways
- Document the contract-selection and adjustment rules.
- Calculate P&L on tradable contracts, not a synthetic index.
- Charge roll turnover and execution costs.
- Test nearby roll conventions for fragility.
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