Daily Commodity Interest

[Guest A_test]

Hi all,

I would just like to understand more about Daily Commodity Interest. I understand that depending on what side of the futures curve the current spot price is you will be credited or debited.

But what side should the futures price be in relation to the current spot price in order to be credited?

How are these futures prices decided and can it alternate between being above and below the spot price?

Can I be debited one month because the spot price is below/above the futures price and then the next month be credited because the spot price is on the opposite side of the futures price (or is the futures price of a particular commodity always above/below the spot price, if so does this mean that when I always sell/buy a particular commodity I will be credited/debited for sure?)?

Thanks a lot for your time. Sorry for complex questioning, I am new to spread betting.😀

[Guest backwardation]

I too am interested in this answer.  @JamesIG can you please chime in.  

[Guest backwardation]

Found the answer here:  

 

[Guest PandaFace]

Yeh easiest way to see is check next futures and if further away is higher you’ll likely be debited. BUT depends on steepness. Also it really is zero sum as movement along the curve with profit and loss on the open position off set it. 

[Guest backwardation]

@PandaFace If I want to scalp oil during the day, but don't intend to have the position open at end of the day, is it better to use spot than futures because of the spread?  Or does it all equal-out somehow?

Do futures have wider spreads than spots on all brokers, or is this an IG quirk?

[JamesIG]

On 13/06/2019 at 19:53, backwardation said:

@PandaFace If I want to scalp oil during the day, but don't intend to have the position open at end of the day, is it better to use spot than futures because of the spread?  Or does it all equal-out somehow?

Do futures have wider spreads than spots on all brokers, or is this an IG quirk?

It would be financially advantageous to use spot in this instance as the spreads are smaller. You'll generally find that the further out you go the larger the spreads irrespective of the broker as the market is less liquid. With IG we also incorporate funding into those longer dated futures as you're borrowing funds to maintain the position for a longer time period as well.