Tango contango

What this futures market structure question tests

This is a foundational finance question that tests whether you understand how futures prices relate to spot prices and the term structure of commodity and financial markets. It is commonly asked in trading and quant interviews to confirm you have mastered the basic vocabulary and intuition of futures markets.

The question probes your grasp of the economic forces that drive futures pricing: storage costs, convenience yields, interest rates, and supply-demand imbalances across different delivery dates. Understanding market structure—when it is normal, inverted, or flat—is essential for trading, hedging, and building pricing models.

• Term structure of futures prices
• Relationship between spot and forward prices
• Backwardation as the opposite regime
• Implications for roll yields and carry strategies