As the month ends positions get moved, or “rolled” from the front month into the next active month. This happens simply because as delivery approaches specs do not wish to get involved (and shouldn’t) with delivery. Because of this feature, when positions are large relative to the overall market, spreads tend to move, sometimes dramatically.

In coffee, where movement in the July/Sep (N/U) spread can often times indicate an overall bullish tone (if the spread narrows) or bearish tone (if the spread widens) may be obscured.  Leaving that indicator moot.

These spreads in Cotton and sugar tend to widen during this period, although as you can see that action has already begun to occur. So look for spreads to be active over the near term.

This entry was posted on Friday, May 29th, 2009 at 11:08 am and is filed under Softs. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.