Hello Everyone, Been following markets and traded CFDs for a while. I've realized that to up my game, I need to know how other products work. CFDs are great in that they just roll over to the next month, but now that I would like to learn and eventually (after paying my dues) master commodity & financial futures. 1) One aspect that puzzles me is how would I choose the expiry month for, say, Gold or Australian Dollar futures? 2) Why that particular month? 3) And assuming I want to hold onto the position near the expiration of that futures contract month, how can I extend it (and would the extension be to my disadvantage or can I do it without affecting my PnL save for commissions) ? Thank you!
1. liquidity - make sure it is liquid. different commodities have different liquid months. 2. carry - understand term structures for each market and use it to your advantage ie long months with abnormal backwardation / short contango
volume, bid/ask during continuous trading hours, and open interests diff products hv diff liquidity behaviours btw, some are all front month, some are every other month, etc. you'll see.
Be also aware of instruments having so-called "physical delivery". Brokers such as IB don't let you hold such contracts beyond their First Notice Date, which is several weeks before the expiry week of the contract.