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Red River Valley | Index funds do not trade spreads they are buying and holding contracts when they roll they sell the contract at face value and buy the next one at face value.
Today if they were going to roll from sept. to Dec. they would sell the sept. contract and buy a dec. contract the math goes like this they sell 5,000 bushels of $4.24 1/2 corn and buy 5000 bushels of $4.39 1/2 corn they get $21,225.00 then they pay 21,975.00 to buy there new bushels for a net roll cost of ($ 750.00 ) per contract. Next month if prices stay flat they will sell 5000 bushels of 4.39 1/2 corn for $21,975.00 and buy a March contract of 5000 bushels for 452 1/4 for a cost of $22,612.50 which they then would have a loss of another
$ 637.50 making the ownership in a flat market with carry cost $1387.50 on 5000 bushels or .28 cents a bushel .
and every morning I wake up and thank the funds for building my grain bins for me and also sending my kids to college lol | |
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700 Million $$$$$$
