Tuesday, May 30, 2006

Gold futures rollover

As you know I'm trading Gold futures and the current frontmonth was ZG M6. Today IB informed me, that their policy forbids trading in a contract which is physically delivered and has first notice day within the next 3 days. Well I wouldn't know where to get or store the Gold anyway, so that's just in my best interests of course.
Next in line was ZG N6, the July Gold contract. So I switched to it, wondered a bit about the low volume and huge spread it showed, but I thought, well rollover is tomorrow so it's to be expected, that July won't show good volume yet.
I even made a trade in it and had some scary moments in it, before after 30min and a -25 and +12 loss/win range I closed the trade at +5 ticks.
Finally a remark in one of the news I follow got my attention: They quoted August Gold, not July Gold. And that's something they only do, if August is frontmonth. Looking at the ZG Q6 contract I saw, what a fool I was trading the July contract. The volume had gone from the ZG M6 contract to the ZG Q6 contract, which showed me the usual 1-2 tick spread in the contract.
Lesson learned: In contracts, which do not follow the 3-month rollover cycle, you have to look where the volume goes instead of just assuming it is the next month available.

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