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Ontario's middle east | If you set a spread you don't "own" the spread, you get assigned an equal number of (in this case) long Z and short N, and that nets out in your account. So say you were short 1 Z and had no N positions, you buy 5 of the z-n spread, your acct would show you long 4z at a price and short 5 N at a price. What those prices are are irrelevant with spread management. You are just establishing the relationship between the 2. That takes a little bit to get your head around. Until you straight out sell all the longs, you still have price exposure, but you are correct in that you can get rid of the short N part by doing an exchange for physical with a cash buyer. That is where you are given futures contracts at the same price you give up physical grain for. Instead of the buyer selling futures to lift there long hedges and you buying back your short hedges, you just agree on a price at or near the board price and swap by each calling your broker and having them move the positions. That eliminates slippage in the hedges. | |
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Storage Hedging
