Crude Oil rollover problems

S

spencer

Economic calenders on Bloomberg imply that crude oil rollover take place every month. HOWEVER, based on both volume and level 2 observations, it seems like
  1. CL 04/13 was skipped for 05/13 or 06/13 (unsure
  2. CL 12/13 was skipped for 01/14, 02/14 or 03/14 (unsure)

I have always just traded the "current" month contract for CL, even if the volume on the month ahead was greater. I'm finding that this is costing me a little. Given that most of my energy trading is option and calender trading (not intraday), I'm humbly a noobie on this, so my apologies in advance.

I have searched around the forum, and couldn't find any good information on this.

Any help from any real energy traders would be very appreciated... message me if you would rather. Thank you!
 
spencer said:
Economic calenders on Bloomberg imply that crude oil rollover take place every month. HOWEVER, based on both volume and level 2 observations, it seems like
  1. CL 04/13 was skipped for 05/13 or 06/13 (unsure
  2. CL 12/13 was skipped for 01/14, 02/14 or 03/14 (unsure)

I have always just traded the "current" month contract for CL, even if the volume on the month ahead was greater. I'm finding that this is costing me a little. Given that most of my energy trading is option and calender trading (not intraday), I'm humbly a noobie on this, so my apologies in advance.

I have searched around the forum, and couldn't find any good information on this.

Any help from any real energy traders would be very appreciated... message me if you would rather. Thank you!
More...

Crude Oil is somewhat seasonal. Between Thanksgiving and Valentine's Day, you can expect that the Average Daily Range (during regular trading hours) will drop from about 1.55 to about 1.25 (with about a .60 standard divergence). I'm sure there are fundamental reasons to explain this, but really it does not matter.

Given this, sometime hedgers/ etc. will roll out two months. But there was no skipping of except as a few traders choose to do so. As for the April slowdown, that seems to be just random. Hope this helps.
 
While the pace of the roll in terms of prompt to second month volume varies by a few days, in terms of last trading day and first notice day (it's a fungible contract) the contract specs and exchange rules are a constant. So, there is indeed a roll every month.
 
Thanks for the replies -

I read elsewhere on an older thread, that the 04/2010 CL contract was skipped for the 05/2010.

The reason I'm coming to the conclusion that it "seems" like some months are skipped, is that the order flow on a couple contracts (04/2013, 12/2013) is completely different than all others. There are far fewer market orders than all of the other contracts (front and previous months) - the contrast is so stark it seems very obvious that the issue lies in the particular month's contract.

I'll dig some more and try to figure it out. I also do not believe it's seasonal, since I've been running the 02/14 and 03/14 contracts this year so far with expected success.

I could have a data issue, but I've heard (although unclearly) that some traders say rollover is ambiguous, and they always monitor the two forward months' volume to check if traders have jumped ahead one month.
 
spencer said:
Thanks for the replies -

I read elsewhere on an older thread, that the 04/2010 CL contract was skipped for the 05/2010.

The reason I'm coming to the conclusion that it "seems" like some months are skipped, is that the order flow on a couple contracts (04/2013, 12/2013) is completely different than all others. There are far fewer market orders than all of the other contracts (front and previous months) - the contrast is so stark it seems very obvious that the issue lies in the particular month's contract.

I'll dig some more and try to figure it out. I also do not believe it's seasonal, since I've been running the 02/14 and 03/14 contracts this year so far with expected success.

I could have a data issue, but I've heard (although unclearly) that some traders say rollover is ambiguous, and they always monitor the two forward months' volume to check if traders have jumped ahead one month.
More...

I think that you are a bit misinformed as to what actually happens to the futures contracts that are held past first notice day from the exchange. They get physically delivered, or settled otherwise using an "EFP" OTC Swap contract. Look at the forward curve open interest in CL:
ftp://ftp.cmegroup.com/pub/settle/stlnymex

Even those months where there currently is no open interest, as time goes by, every single one of those will populate with open interest. As previous months expire, those will become the defacto front month primary futures contract. There is absolutely no such thing as a "skipped" futures contract in terms of rollover. Much to learn young skywalker.

Final Settlement Procedures: http://www.cmegroup.com/trading/energy/files/NYMEX_Energy_Futures_Final_Settlement_Procedure.pdf

Contract Specs:
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html

Months don't get skipped. The pace of the roll in terms of front month to second month volume displacement can vary by a few to several days, but each and every month rolls forward and then expires per Nymex procedure without exception.
 
Thanks for the info.

It looks like I have a data problem, however it also looks like I have a couple of wrong dates on the crude oil rollover.

One trader confirmed to me that occasionally, the next-closest front month (one month ahead of the current month) will have more volume than the current month. This doesn't make too big of a difference with price, but it hugely affects level 2, which is the basis of my outright crude trades (and all of my intraday trades elsewhere).

I'm going to examine my data, and also look at the level 2 on the two months in question (05/13 and 12/13), and compare to the rest and see if I skipped rollover. In the mean time, if anyone can confirm to me that at least once in the past traders 'skipped' a month that was on paper the current month, but the next front month had more volume, please post. Thanks! :)

bone said:
I think that you are a bit misinformed as to what actually happens to the futures contracts that are held past first notice day from the exchange. They get physically delivered, or settled otherwise using an "EFP" OTC Swap contract. Look at the forward curve open interest in CL:
ftp://ftp.cmegroup.com/pub/settle/stlnymex

Even those months where there currently is no open interest, as time goes by, every single one of those will populate with open interest. As previous months expire, those will become the defacto front month primary futures contract. There is absolutely no such thing as a "skipped" futures contract in terms of rollover. Much to learn young skywalker.

Final Settlement Procedures: http://www.cmegroup.com/trading/energy/files/NYMEX_Energy_Futures_Final_Settlement_Procedure.pdf

Contract Specs:
http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_contract_specifications.html

Months don't get skipped. The pace of the roll in terms of front month to second month volume displacement can vary by a few to several days, but each and every month rolls forward and then expires per Nymex procedure without exception.
More...
 
I just noticed on an old journal from a few years ago I had crude written for Feb, April, May, July, Sept, Oct, Nov, Dec.

I wasn't trading crude at the time, and maybe these weren't rollovers, but is it possible this was the old crude rollover?

I know this is a very dumb question, but I just want to be extra clear and careful. Thanks all! :)
 
Just in case anyone was wondering or read this - I had a data issue that I fixed shortly after posting this. Using proprietary software to look in the rear view mirror and it is not always perfect! :eek:
 
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