continuous vs 9-15 contract

[nepenthean]

Hello. I know you guys are busy, so thanks in advance for the help!

http://futures.tradingcharts.com/chart/CL_/M?anticache=1438809787

Above is a link to a continuous monthly chart of CL non-pit. It has a low placed in 3/15 not yet breached.

I have a monthly merged/back adjusted chart of CL 9-15 with a new low placed in July.


Shouldn't a back adjusted chart have different price levels but the same relative lows/highs?

[NinjaTrader_Kyle]

Hello nepenthean,

Thank you for your post.

You are correct that the same relative highs and lows should be seen however it is difficult to determine exactly why the differences exist not knowing how the other data source merges and backadjusts the data which is presented on that page.

Do you see these same type of differences within NinjaTrader when comparing the dated contract to the continuous contract?

[nepenthean]

I opened the ##-## CL monthly contract, and the 3/15 low is 44.11. On a merged backadjusted 9-15 contract the 3/15 low is 47.09. My question is why on the 9-15 contract is the present price (~43.80) so much lower than the 3/15 low as opposed to the continuous chart where price just made a marginal lower low than the 3/15 low?

Thanks in advance.

[Harry]

I opened the ##-## CL monthly contract, and the 3/15 low is 44.11. On a merged backadjusted 9-15 contract the 3/15 low is 47.09. My question is why on the 9-15 contract is the present price (~43.80) so much lower than the 3/15 low as opposed to the continuous chart where price just made a marginal lower low than the 3/15 low?

Thanks in advance.

This is as expected.

In a merge-backadjusted contract all rollover gaps are eliminated. In order to eliminate the gaps an offset is added to or subtracted from all price bars of the prior month contract. Today is August 9, which means that the prices shown in March have been corrected for the rollover offsets on

- July 17 (0.32)
- June 16 (0,42)
- May 15 (0,94)
- April 7 (1,38)


Crude oil is typically in a contango situation. Therefore the rollover offsets add up and the contract month 04-15, which expired on March 18 was shifted (=backadjusted) five times for a total amount of 3.06 $. The backadjustment accounts for most of the difference that you have observed.

The continuous contract also has the past data adjusted, but in a more complex manner, which depends on your data provider. For example with my data provider the March low appears to be 42.41. But I do not trust in contiuous contracts, because I usually do not understand how they are built. For a backtest the only valid contract setting is merge-backajdusted, although the absolute prices are distorted.