Important question for me: when your broker close your position on Ag commodities ? For all US futures Ag commo, IB close me around 20 days before expiries. I would like to stay till the end and I know that people with brokers who go in deliveries can stay much longer.
At Marex, it is your responsibility to close long positions before First Notice and you can stay short until expiration. They simply send you a reminder everyday from day - 4. They won't do anything. They will notice you of someone intending to deliver you the stuff and they will retender if you don't want it...if they can. Or sell your positions OTC for whatever price. Beware of delivery periods... A few years ago I had forgotten about a long position in an illiquid market( sugar 16 )...I had an order staged there but didn't realize the FND was the fourth day or something like that of the PRECEDING month...The last day come, there is no offer in the market...Just 30 min before the close, my savior came with his little offer, but I would have been completely screwed...To this day I have never calculated what it would have costed me, perhaps I would have been out of business...
Long Nov/Short Jan Robusta @ -8. "1058 GMT Coffee traders remain skittish about the possibility that a market player may try to squeeze the November robusta contract following a similar scenario in July. "Short squeezing" occurs when investors are forced to deliver contracts they held as part of a bet on falling prices. This in turn triggers a buying frenzy as they scramble to buy out of the contract, causing the price to skyrocket. In a market report last week, Rabobank noted the "very real risk" of another major long position, which could push the contract's premium up to $150, would likely keep certified stocks high. (katherine.dunn@wsj.com) "
I am probably exaggerating. But not that much. My account was much smaller at the time. Just check what your broker will charge you as a penalty fee, probably something like 10K per lot. On top of the OTC or retendering price loss ...
Yeah, we need to be very careful on liquidity near expiry. An important point on open interest near expiries : Open interest is not "real" but stated by clearing house to the exchange... For instance Newedge state that for a given day the open interest is 100. However, Euronext/CBOT cant check these number because Euronext/CBOT has no view on the netting between the NewEdge clients. Near the expiry, NewEdge "suddenly" realise that the open interest is fake and that all its client have 0 open interest. You can see it in the data when open interest falls without any volume.. Its happens a lot ! Even if you think that you have only 1 % of the open interest, you could have 10 %, 50 % or 100% ... Then the big cash trader guy in front of you could try to rape you because you cant deliver... If my memory is good, Cargill is an exchange member.
Are you still in the MW Dec/Mar spread? I was thinking about closing it before Grain stocks. My target was at -12.5 but I am not sure I want to risk a bearish news for 1 point...
i closed it @-13.5 on friday. Kinda long flat and bearish environment. Also spread usually rises something like 1 month, so the time was up.