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Options Jive - October 20, 2025 - Forward Curve Analysis: Why Contango and Backwardation Matter for Options Traders

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Manage episode 514728366 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://podcastplayer.com/legal.
Hosts Nick and Tony explored forward curve mechanics as markets rallied sharply (E-mini S&P +46, VIX collapsing to 19.76 from over 22). The segment distinguished between equity IV curves that highlight event-driven volatility like Tesla's October 22nd earnings spike, and futures forward curves that reveal macro themes through contango (weak current demand) or backwardation (strong current demand). Nick used Tesla's curve to demonstrate how front-month IV spikes before earnings then collapses post-event, while the natural gas curve illustrated extreme seasonality with winter months trading $1 premium (nearly 4.25 vs 3.30 spot). The critical insight was that futures options expire to specific futures contracts with their own pricing along the curve, making it dangerous to buy far-dated options assuming "cheaper" strikes without understanding curve positioning. Nick aggressively managed winners, taking Oracle strangle profits after weekend vol collapse and AMD gains, while noting gold's reversal (+$100 from session lows) helped his short positions including a 3,800-3,850-3,900 butterfly that had been 300 points in the money.
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1650 episodes

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Manage episode 514728366 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://podcastplayer.com/legal.
Hosts Nick and Tony explored forward curve mechanics as markets rallied sharply (E-mini S&P +46, VIX collapsing to 19.76 from over 22). The segment distinguished between equity IV curves that highlight event-driven volatility like Tesla's October 22nd earnings spike, and futures forward curves that reveal macro themes through contango (weak current demand) or backwardation (strong current demand). Nick used Tesla's curve to demonstrate how front-month IV spikes before earnings then collapses post-event, while the natural gas curve illustrated extreme seasonality with winter months trading $1 premium (nearly 4.25 vs 3.30 spot). The critical insight was that futures options expire to specific futures contracts with their own pricing along the curve, making it dangerous to buy far-dated options assuming "cheaper" strikes without understanding curve positioning. Nick aggressively managed winners, taking Oracle strangle profits after weekend vol collapse and AMD gains, while noting gold's reversal (+$100 from session lows) helped his short positions including a 3,800-3,850-3,900 butterfly that had been 300 points in the money.
  continue reading

1650 episodes

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