BackQuant Glossary
Backwardation
A market structure in which near-dated contracts trade at higher prices (or higher implied volatilities) than longer-dated contracts. In futures, backwardation often signals near-term scarcity. In options IV term structure, backwardation signals an imminent catalyst or active stress in the market.
Related terms
Futures
A standardized contract to buy or sell an asset at a set price on a future date. Crypto futures with fixed expiries exist alongside perpetual futures (perps) which never expire. Quarterly futures concentrate the most open interest.
IV Term Structure
The curve of implied volatility plotted across expiries at a fixed moneyness. Upward-sloping (contango) is the normal state. Downward-sloping (backwardation) signals an imminent event or active market stress. Term-structure shifts often front-run direction.
Long
A position that profits when price rises. Buying spot, going long a perp, owning a call, or being short a put are all long positions. Opposite of short.
Basis
The difference between a futures or perpetual price and the underlying spot price. Positive basis means futures trade at a premium to spot; negative basis (sometimes called inverse basis) signals near-term selling pressure or fear. Cross-venue basis arbitrage is a core strategy in crypto market making.
Bid-Ask Spread
The gap between the highest current buy order (bid) and the lowest current sell order (ask) on an order book. Tight spreads indicate deep liquidity and competitive market making. Wide spreads indicate stress, low activity, or thin books.
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