Crude Oil

[NeilL]

With the price it was, how Oil has flown back is a bit of a surprise considering there’s still way too much of it, with not enough storage. What’s everyone’s thoughts on this? Are these prices a false dawn?!

[Caseynotes]

2 hours ago, NeilL said:

And I see the expiry is the 18th this month on a Monday after the weekend! Could be interesting!

ha yes, that should be fun.

[Caseynotes]

37 minutes ago, NeilL said:

With the price it was, how Oil has flown back is a bit of a surprise considering there’s still way too much of it, with not enough storage. What’s everyone’s thoughts on this? Are these prices a false dawn?!

Could very possible turn out the same as the last (May) futures expiry, a large drop. Because traders are still buying Longs (futures) and oil producers are obliged to deliver on expiry but the traders don't want to take delivery and besides there is no storage capacity so they'll end up paying someone to take the contacts off their hands (price drops below zero).

 

[NeilL]

I presume that would happen at the June future expiry date or not long before that? What’s around the 21st isn’t it?? Obviously nothings set in stone but it does look like it will follow the same pattern as before. Certainly worth keeping an eye on!

[Caseynotes]

7 minutes ago, NeilL said:

I presume that would happen at the June future expiry date or not long before that? What’s around the 21st isn’t it?? Obviously nothings set in stone but it does look like it will follow the same pattern as before. Certainly worth keeping an eye on!

correct, CME June expiry is 21st of May, IG's is late afternoon 20th of May (uk time).

see pic.

Edited May 1, 2020 by Caseynotes

[NeilL]

Also Caseynotes if I took out a June future contract at sell at roughly what is now(1900) I would not have any overnight charges correct?

[Caseynotes]

18 minutes ago, NeilL said:

Also Caseynotes if I took out a June future contract at sell at roughly what is now(1900) I would not have any overnight charges correct?

that is correct, there are no overnight charges on futures contracts. timing as ever is the problem, note in the chart that though there was tailing off in price from April 17th the collapse was sharp when it came as those holding longs tried to sell them but found no takers (lack of storage capacity) and so they had to pay to get rid of them in the end (negative oil price).

So even if a collapse around next expiry does come price may still rise for a while yet and so there is risk of getting stopped out of a short. 

This is the type of circumstance where an option might offer the better trade.  

[fihagil]

26 minutes ago, Caseynotes said:

that is correct, there are no overnight charges on futures contracts. timing as ever is the problem, note in the chart that though there was tailing off in price from April 17th the collapse was sharp when it came as those holding longs tried to sell them but found no takers (lack of storage capacity) and so they had to pay to get rid of them in the end (negative oil price).

So even if a collapse around next expiry does come price may still rise for a while yet and so there is risk of getting stopped out of a short. 

This is the type of circumstance where an option might offer the better trade.  

Worth noting that some options expire one or two days before the actual future contract does. So if that is the case, with the option you miss out on the last day of fun that the US Oil May contract showed. 

The same can apply to automatic rollover if I'm not mistaken, i.e. you get rolled over to July contract before the day of the June contract expiry.

[NeilL]

I presume if you’ve got auto rollover turned off it just settles on whatever figure it’s on when it finishes? 

[Caseynotes]

19 minutes ago, NeilL said:

I presume if you’ve got auto rollover turned off it just settles on whatever figure it’s on when it finishes? 

yes, you can see the IG expiry date and time on the info dropdown on the deal/order ticket (icon marked i).

[NeilL]

And of course if it goes to negative you’d lose money as well! 

[NeilL]

I presume you can close a future contract at any time like a normal deal Caseynotes?

[Caseynotes]

13 hours ago, NeilL said:

I presume you can close a future contract at any time like a normal deal Caseynotes?

yes that's correct, you can close out at any time.

[NeilL]

And I see the expiry is the 18th this month on a Monday after the weekend! Could be interesting!