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BMO: traders get lesson on rolling futures positions

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Events in the gold and crude-oil markets in recent weeks taught speculators to pay attention to important dates for futures contracts and not to wait to long to roll forward positions, said BMO Capital Markets. Most speculators do not want to take delivery of any commodity, so ahead of first-notice day, either exit or roll their positions from a nearby contract to one further into the future. “If there is one key thing to take away from the last few weeks in commodity markets, it is to understand contract expiry dates for those with physical delivery against positions,” BMO said. “In gold, we saw a lack of appropriate gold bars to deliver into the March contract expiry, leading to a strong futures premium over physical prices. In WTI [West Texas Intermediate] oil yesterday we saw the opposite with physical delivery slots fully allocated for May delivery, pushing prices into negative territory. The key lesson from oil is not to wait too long to roll positions in heavy contango markets.”

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