Nelson - IMHO, you are correct and at the same time not correct bying further month on the gold.
Volume is pretty good, and relative liquidity is there, even for Dec contracts. I observed that the gold futes move in parallel, at least the moves are too small for me to trade on. Essentially, no advantage to buy a specific month instead of another, even cash.
You don't buy the futures, remember, you only have to maintain a margin of $1000 for each contract of 100 oz. gold.
At the end of the day, your position is marked to market for the unrealized profit and loss between your buying price and the settlement. The difference matters, not the price.
However, your rationale is correct in conjunction with futes options. Use further months in combination plays, futures spreads, or futes options synyhetics and other exotic plays.
For my part, I only buy options on the metals (risk is well defined by the premium).
And ideed, for options, I look at the Dec 2003 contracts.
Chip directed you to the fair-value concept. A difference tho, less meaningfull as time passes, is the dividend yield used in the calculation.
On gold futes, you would use the "forward rate", which is Gold Forward Rate - less LIBOR ( lbma.org.uk )
Index futes or other commodities as the energy have seasonals priced in the further months. What applies to the gold futes is not the same as for other commodities.
Hope my fuzzy logic helps a bit <ng>. |
