{"id":6327,"date":"2024-11-15T06:13:23","date_gmt":"2024-11-15T06:13:23","guid":{"rendered":"https:\/\/www.alcircle.com\/blog\/?p=6327"},"modified":"2024-11-15T09:18:18","modified_gmt":"2024-11-15T09:18:18","slug":"hedging-jorge-episode8-exploring-art-carry-trade-futures-markets","status":"publish","type":"post","link":"https:\/\/www.alcircle.com\/blog\/hedging-jorge-episode8-exploring-art-carry-trade-futures-markets","title":{"rendered":"Hedging with Jorge #Episode8: Exploring the art of carry trade in futures markets"},"content":{"rendered":"<p>In our last discussion, we explored the concept of going <span style=\"color: #0000ff;\"><a href=\"https:\/\/www.alcircle.com\/blog\/author\/jorge\/\"><span style=\"color: #0000ff;\"><strong>short in the futures market<\/strong><\/span><\/a><\/span>, focusing on how this position performs when prices rise or fall. We also clarified the role of guarantees. Now, let\u2019s dive into an intriguing new topic: the concept of carrying a short position forward into a new contract period\u2014also known as a carry trade.<\/p>\n<p><iframe loading=\"lazy\" title=\"Hedging with Jorge #Episode8: Exploring the art of carry trade in futures markets\" src=\"https:\/\/www.youtube.com\/embed\/Yy6O7gIVRWY\" width=\"700\" height=\"300\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Imagine you hold a short position set to expire in December, but you wish to extend it into January. To do this, you\u2019d execute a carry trade by \u201crolling over\u201d your position from one contract to the next. This transition involves closing your December short and opening a new short for January.<\/p>\n<p>In futures markets, prices often vary depending on the contract\u2019s time frame. This brings us to an important pricing structure known as contango. Contango occurs when the prices of contracts with further-out expiration dates (like January or February) are higher than those closer to the present (like December). For example, if January prices are higher than December, the market is in contango.<\/p>\n<p>Here\u2019s where it gets interesting: in a carry trade during a contango market, if you close your December position and open a new one for January, you could potentially benefit from the higher price of the January contract. This process, known as borrowing in contango, allows traders to profit from the roll-over as they \u201cbuy low\u201d on the nearby contract and \u201csell high\u201d on the further contract.<\/p>\n<p>Stay tuned as we explore these futures pricing strategies in more depth and discuss contango, carry trades, and price structures in upcoming posts!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In our last discussion, we explored the concept of going short in the futures market, focusing on how this position performs when prices rise or fall. We also clarified the role of guarantees. Now, let\u2019s dive into an intriguing new topic: the concept of carrying a short position forward into a new contract period\u2014also known [&hellip;]<\/p>\n","protected":false},"author":89,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-6327","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-open-forum-for-aluminum-community-blog"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Hedging with Jorge Exploring the art of carry trade in futures markets<\/title>\n<meta name=\"description\" content=\"The concept of carrying a short position forward into a new contract period\u2014also known as a carry trade.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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