WK07-WN07 Spread : Data problem or huge spread width?

TraDaToR

TraDaToR

Hello,

I have been testing some spread systems lately and I found a big discrepancy in spreads between may and july spread on wheat? Is it a data problem ? If it 's not the case, what caused this deep widening spread( in the center of the chart )?

It just seems that I don't usually run into such discrepancies.
 

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May-2007-Wheat has expired. According to the quote board, May-2008 hasn't traded today. The front months are all sharply higher. The May should be settled higher at the close if the front months remain firm. For the next six months, May will be very illiquid. Leave it alone until later in the year.
 
Thanks, but I'm talking about historical datas. It seems that there has been a big spread variation in the winter. I was just asking if someone knew what it was related to and if it was common 'cause i haven't seen much spread behaviours like this one in tests.
 
The difference in the May/July spread last October is correct. A number of wheat floor traders got blown out during that event.

In essence, the locals were trading with the Goldman roll (bear spreading). Some bad weather news hit (worst drought in Australia in 100 years), and the spread exploded.
 
Here it is nazzdack. I hope it is a better chart. there is a spread diff indicator below.

Thanks a lot Fully Articulate, that was the kind of information I was looking for. I thought it was a quite unusual event.

Please, why is the goldman roll refered to as "bear spreading". I was thinking it was just the time when positions related to the GSCI index were rolled over...

Thanks a lot.
 

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Quote from TraDaToR:

Please, why is the goldman roll refered to as "bear spreading". I was thinking it was just the time when positions related to the GSCI index were rolled over...
More...
Let's say Goldman owns May and they need to roll into July. They are essentially putting on a spread:

Sell May, Buy July

Otherwise known as a bear spread in these carry commodities. :-)
 
Since may is an old crop month and july is a new crop month there can be some huge differences in the spread from year to year. New crop is always the crop everyone is uncertain about and the old is the crop that the trade has more of a handle on. Hope that helps.
 
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