March 5, 2013

• Rollover Week = Hedging Heaven

  This is the week Future March contracts are rolled over to the June contracts. Each contract period runs for 3 months and there’s a transition period as the old contract comes to a close and the new contracts ramps up in volume.

  Prior to rollover, the forward contract has lower volume and the price spread between the bid and ask is typically worse than the current contract.

  However, volume in the forward contract starts increasing as it gets closer to contract expiration of the current quarter, which means better pricing.

  The golden period is during rollover week as well as the following week as the next quarter Future contract becomes the main one with increasing volume and the old contract starts winding down. Both contracts have heavy volume, giving both of them great price spreads which allows easy hedging between the two contracts with no price spread discrepancies.

  This stands out all the more to me now that I’m employing hedging in my methods.

  • 5:14 pm
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