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Alexander Levitin wrote:
>
> [snip]
> Settlement by Delivery.
> Those contracts that have not been offset and remain open at the end
> of the delivery period must be fulfilled by physical delivery. (One
> exception to this is futures that call for cash settlement).
> The precise method by which delivery is made varies from market to
> market.
> For most commodities, deliveries begin before the last trading day.
> Anytime on or after the first notice day, shorts may notify the exchange
> clearinghouse of their intention to deliver. The clearinghouse then
> allocated delivery notices among the longs.
In (most?) other contracts which are not cash settled, delivery occurs
after FND (first notice day) and the contract can continue to change
price while deliveries occur in the period between FND and LTD. As I
understand it, shorts issue the delivery notices. This means that long
speculators must get out before FND, to avoid delivery. Short specs.
could remain in and not worry about delivery problems altho the
liquidity will dry up and he might be subject to higher spot month
margins. And some brokerage do not allow even short specs to stay in
beyond FND, I believe.
Petroleum contracts appear to have a different process. The LTD is the
only one listed in most lists. On nymex.com there are listed notice and
delivery days which are *after* LTD (which they call "termination"). It
appears that here deliveries occur after the contract "goes off the
board". I assume that as a spec you have to watch volume or OI to know
when you ought to get out since you don't have a specific FND limit.
Presumably the voi decreases several weeks before LTD? Also, for other
commodities spot month margins are applied between FND and LTD I
believe. I wonder when they are applied in the petrol. complex. For
instance, Jun crude just had termination day 5/20. Does this mean that
Jul is already considered the spot month? Spot month crude margins are
$6075 instead of $1620 ! does this mean that if you are in Jul crude,
you'd have to increase your margin commitment that much on 5/20? July
is still the more liquid month (vol about 50k vs. 10k for Aug. and
Sept.) so one might prefer to be in that month, but maybe not if margin
is 4x.
Conrad Bowers
>
> Earl Adamy wrote:
> >
> > In reviewing contract specs for a number of the non-financial futures on various futures exchange web pages, I'm seeing references to "notice" and "delivery" dates which occur prior to contract expiration. The exchanges don't seem to provide clear explanations of these terms and I don't find anything in my various books. I have a feeling that this may be similar to options which are exercisable prior to expiration. Would someone provide a brief explanation of these terms? The last thing I need
>
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