CandelaCharts - Contango Slope Index

📝 Overview

The Contango Slope Index (CSI) is a volatility term structure analysis tool designed to quantify the slope of the VIX futures curve over time.

By measuring the rate of change in implied volatility across multiple tenors—such as VIX1D, VIX (1M), VIX3M, VIX6M, and VIX1Y—the CSI provides traders and analysts with real-time insights into market sentiment, risk appetite, and potential turning points in equity markets.

Developed by CandelaCharts, the CSI draws from established financial research on volatility term structures, particularly focusing on how contango (upward-sloping curve) and backwardation (downward-sloping curve) regimes correlate with future market behavior.

The index computes a normalized slope using linear regression across available VIX futures, offering a dynamic view of evolving market expectations. The core output a slope value expressed in annualized percentage points per year (%/yr)—represents the steepness of the volatility curve:

• Positive slope: Contango regime, typically associated with market stability and complacency.
  
• Negative slope: Backwardation, historically linked to fear, near-term uncertainty, and often preceding market rallies.
  
• Slope crossing zero or key thresholds: Generates regime shifts and alert conditions.
  

📦 Features
The Contango Slope Index offers a comprehensive set of features for analyzing volatility dynamics:

• Multi-Tenor Volatility Input: Users can select which VIX futures contracts to include in the slope calculation: VIX, VIX1D, etc
  
• Dynamic Slope Calculation: The indicator calculates the slope of the VIX term structure using linear regression on time-to-maturity (TTM) vs. volatility levels.
  
• Moving Average Overlay: A configurable moving average (SMA, EMA, RMA, WMA, VWMA) is applied to the smoothed slope to identify trend direction and momentum shifts.
  
• Regime Classification: Based on the slope value and its relationship to the moving average, the CSI classifies current market conditions into distinct regimes.
  
• Visual Enhancements: Color-coded slope line, background shading, etc
  
• Real-Time Label & Tooltip: On the last bar, a dynamic label displays: Current regime, Slope value and direction, etc
  

⚙️ Settings

• VIX: Toggles use of spot VIX index (CBOE_DLY:VIX).
  
• VIX1D: Toggles use of 1-day VIX futures (CBOE_DLY:VIX1D).
  
• VIX3M: Toggles use of 3-month VIX futures (CBOE_DLY:VIX3M).
  
• VIX6M: Toggles use of 6-month VIX futures (CBOE_DLY:VIX6M).
  
• VIX1Y: Toggles use of 1-year VIX futures (CBOE_DLY:VIX1Y).
  
• MA: Enables moving average filter; options include type (SMA, etc.) and period length.
  
• Slope: Defines slope calculation line thickness and colors.
  
• Bg: Enables background shading with customizable colors.
  

⚡️ Showcase

Slope Line

Customizable Moving Average

Regime Shift Zones


📒 Usage

The CSI is plotted as a standalone oscillator beneath the price chart (non-overlay mode). Key interpretation guidelines:

Slope Direction

• Slope < 0 - Backwardation: Indicates near-term volatility is higher than long-term expectations. Historically, this has preceded equity market rallies, as panic subsides and fear peaks.
  
• Slope > 0 - Contango: Reflects normal market conditions where longer-dated volatility is priced higher. Persistent high contango may signal complacency.
  

Magnitude of Slope

• Slope > 0.0232 (%/yr) - Elevated complacency: The term structure is steeper than historical average—caution advised ahead of potential corrections.
  
• Slope near 0 - Neutral or transitioning regime: Markets may be at inflection points.
  

Slope vs. MA Crossover

• Slope crosses above MA: Improving confidence, potential upside acceleration
  
• Slope crosses below MA: Deteriorating structure, rising stress
  

🚨 Alerts

Six pre-configured alerts are available for integration into trading systems:

• 🚨 Backwardation Detected – Slope turns negative
  
• 🔚 Exit Backwardation – Slope crosses above zero
  
• ⚠️ Elevated Complacency – Slope exceeds 2.32%/yr
  
• 📈 Potential Bullish Setup – Slope crosses below zero
  
• ✅ Slope Crosses Above MA – Momentum improves
  
• ⚠️ Slope Crosses Below MA – Momentum deteriorates
  

⚠️ Disclaimer

These tools are exclusively available on the TradingView platform.

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