Choosing Expiry Month

[kongkalikong]

Hello Everyone,

Been following markets and traded CFDs for a while. I've realized that to up my game, I need to know how other products work. CFDs are great in that they just roll over to the next month, but now that I would like to learn and eventually (after paying my dues) master commodity & financial futures.

1) One aspect that puzzles me is how would I choose the expiry month for, say, Gold or Australian Dollar futures?

2) Why that particular month?

3) And assuming I want to hold onto the position near the expiration of that futures contract month, how can I extend it (and would the extension be to my disadvantage or can I do it without affecting my PnL save for commissions) ?

Thank you!

 

[believezz]

1. liquidity - make sure it is liquid. different commodities have different liquid months.
2. carry - understand term structures for each market and use it to your advantage ie long months with abnormal backwardation / short contango

 

[kongkalikong]

1. liquidity - make sure it is liquid. different commodities have different liquid months.
2. carry - understand term structures for each market and use it to your advantage ie long months with abnormal backwardation / short contango

How can I find which months are most liquid? Just looking at the average trading volume?

 

[believezz]

volume, bid/ask during continuous trading hours, and open interests

diff products hv diff liquidity behaviours btw, some are all front month, some are every other month, etc. you'll see.

 

[HobbyTrading]

Be also aware of instruments having so-called "physical delivery". Brokers such as IB don't let you hold such contracts beyond their First Notice Date, which is several weeks before the expiry week of the contract.