Expiration of metals, commodities and agricultural futures

Discussion in 'Commodity Futures' started by travis, Jun 29, 2008.

  1. travis

    travis

    What happens if I am holding one of these futures (agricultural and such) and they reach expiration? Are they going to deliver the soybeans to my house or can I still cancel it?

    I am using IB TWS and on some of these futures there's no warning of expiration ("roll over" warning). In case I make a mistake am I going to be stuck with the physical delivery of the goods?

    I know that if the YM, ES and other futures with an underlying stock index expire there is no problem at all (no delivery). Can you please tell me what happens with futures such as the following?

    Corn
    Oats
    Rough rice
    Soybean meal
    Soybean oil
    Soybeans
    Wheat
    Live cattle
    Feeder cattle
    Lean hogs
    Frozen Pork Belly
    FC Orange Juice "A"
    Heating oil
    Natural gas
    Copper
    Platinum
    Silver
    Cotton #2
    Cocoa
    Coffee "C"
    Sugar #11
     
  2. hausse

    hausse

    It is advisable to be aware of the first notice days of the contracts you hold and liquidate them before that day. You find the FND info on the websites of the exchanges. Should you be assigned delivery you can re-tender the commodity but that costs money like storage or pipeline fees and why go through the hassle? Better to exit the old contract before the FND and as long as it still has liquidity and enter another delivery.

    Long ago I overlooked a crude FND and had to take or make delivery, I forgot which. My broker handled the matter for me but it cost me enough money to make me not repeat that.
     
  3. travis

    travis

    Thank you very much. You made an error due to distraction and you paid a lot of money for it. Ok, my question is exactly how much money do you lose if you make a mistake like that? Say you have a NYMEX CL contract - how much do you lose due to a mistake like that? 1000 dollars or more?
     
  4. hausse

    hausse

    I think I paid about $800 per lot, 10 or 11 years ago. I can't tell you the exact procedure and how much it cost now. Likely more if I wasn't charged an unfair amount.
     
  5. Surdo

    Surdo

    ... to the best of my knowledge, electronically traded CL is financially settled now as are QM.

    Quite simple, watch the calendar for FND.

    el surdo
     
  6. travis

    travis

    I just wanted to make sure that if anything went wrong (I got sick, I was in a coma for a month), I wouldn't get a train full of potatoes delivered to me. 800 dollars per lot? What is that for 1 contract? Just 800 for 1 contract? As long as I don't lose 100,000 dollars, it's ok.

    So I made some calculations and finally decided that it's only worth to trade the most liquid and less correlated futures (for diversification purposes) among the ones I mentioned earlier.

    The image of the pivot table I am attaching shows that there are some strange expiration months for most of them. Can anyone explain why and if it is correct?

    (By the way, someone may suggest to trade yet other futures than the ones I mention in the table, so I do need to clarify that I am already trading YM, ES, GBL, CL, GC, EUR, GBP, JPY).
     
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  7. The Interactive Brokers web site says:

    If a customer has not closed out a position in a physical delivery futures contract by the Close-Out Deadline, IB may, without additional prior notification, liquidate the customer’s position in the expiring futures contract.

    http://www.interactivebrokers.com/en/p.php?f=deliveryExerciseActions&ib_entity=llc

    Although "IB may" != "IB will", they may be just taking care of it for you automatically. They are pretty good with "automatic liquidation without prior notice". I once let a losing ZS trade fall below maintenance margin in one of my small test accounts, and they automatically liquidated it within 3 minutes.
     
  8. BTW, I check the below site every few days to make sure I am not forgetting any expirations or market altering announcements:

    http://www.mrci.com/reports.php

    Their other stuff requires a paid subscription but the report schedule is free.
     
  9. travis

    travis

    Thank you for your help.