Last month, I spent some time calculating the fair value of a futures contract in preparation for the current futures roll period.
I've backtested it and noticed that fair roll generally gives me an opposite signal. For example, if the fair roll (front minus back) is -2 ticks, I've noticed that the roll continues to cheapen more into the first notice period. I've spoken to the traders and they mentioned that sometimes it gives you the wrong direction and it is now driven by positioning data from institutional investors.
What good is using the fair value then?