Cotton traders keep close watch on July/Dec spread

14 Jun '14

2 min read

It is all about the spread. The trade has their eye glued to the screens, watching the July/December spread come back out.

Since last Friday, the spread has come out 245 points to close the week at 923 points, July over Dec. The index roll seemed to be the best opportunity for the trade to find relief but the opposite occurred.

The trade seemed to take advantage of the liquidity to also roll as well as any other shorts who just got out completely given the heating battle for the cert stock. There are some interesting theories floating about as to who will be taking it and for what reasons but most everyone is getting out of the way to reduce any July exposure. As a result the open interest on the front month continues to fall and rise on the spot.

Options expired and for now it looks like no one tried something out of the ordinary.

This week’s WASDE report was mildly bearish given that the USDA didn’t raise U.S. production the amount the market believes we could see. Once again, last weekend’s rains in west Texas theoretically continue to add bales and money into the hands of the farmers.

There are still a few long hot months to come and with “The Boy” affecting the World’s weather patterns, who knows what will happen.

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