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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
I don't trade Soybeans often but yes Sep is Premium to November. If you roll (sell Sep/buy Nov) you won't actually collect premium but you will have a position in November with a lower cost basis.
@SMCJB so you would still "hope" November price rises if you are maintaining the long position (that you got at a discount)?
I am trying to understand a little better the roll-yield play.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,388
Thanks Received: 10,207
Well hopefully you have more conviction than 'Hope'!
If your trading a spread as a position you profit (or lose) based upon how the spreads move, aka how the individual months move in relation to each other.
Your not doing that, your rolling a long out of the spot month into the next month to avoid delivery. In this scenario you are exchanging outright risk in September for November. What the spread does after you execute the trade is nothing other than hindsight - although spread movements going into expiration normally give a good indication of fundamentals.
People talk about roll yield, meaning whether you paying more or less for the next month. In this case you have a positive yield. Roll yield is very important in two scenarios's, A) when you have a fixed number of dollars to invest and are using futures to proxy the underlying (think USO, UNG etc the commodity ETFs) and B) when your in an index fund that is always long. Contango markets (negative roll yield) normally kill these types of investments.
Do u stick to commodity spreads? or also trade outrights and options as well? I am starting to read up on commodity spreads and have a Qtrader account so want to start practicing
I mainly sell Options (outrights, spreads), but also trade future outrights and spreads.
Currently my only spread trade is the CZ-CU, which I entered recently. Seasonals suggest that this spread should move upwards until early August. Soil moisture is good in a large part of the US, thus there is a high probability of success.
Risk: Very high temperatures in July during the pollination period.
