24.45 21.45 1839 3.555 Nov 28.05 28.20 26.00 + 038 3010 1820 1450Sept 21.53 21.54 1889 1,529 Bec 26.00 28.10 25.70 me + 040 050 149 36,59Nov 20.86 20.86 1865 1,130 2555 2560 25.50 25.90 + 0.42 2000 1890 12.385J02 20.70 20,70 1800 414 | Feb 2531 25.60 25.31 2568 + 0.44 2815 1994 6,208Mar 20.82 20.82 19.01 424 Mar 25.10 2540 25.10 2548 + 046 27.90 1845 4247May 20.92 20.92 20.2 187 ie 24,98 25.15 2498 25.22 + O47 2750 2095 2.950duly 21.05 2105 21.05 2105 + | 25 20.0 ar lay 24.93 2493 2403 2498 + 048 27.35 2084 3,021est vol 178; vol Wed 1,495; open int 8,711, 785. dune 24.40 2460 24.40 24.74 + 049 27.25 1735 21,331Cotton (NYBOT} yso.gg0 ibs.; cents per tb. July ue se wm 24,54 + O5t 26.95 1985 1997Ma 53.01 53.05 4993 5009 - 258 70.50 4993 36,505 Aug 24.20 24.20 24.20 2434 + 053 2877 2053 1,118duly = 53.90 54.05 51.05 51.30 ~ 228 7110 51.05 14542 Sept Lid + 6055 24.59 20.43 5,682Oct 54.20 54.20 5279 5277 - 86 67.20 5279 ttI7 Oct + O57 236 2286 = 1,254Dec 54.90 54.40 5290 53.13 - 92 67.70 5290 15.972 Nov + 059 250 2277 1011wee 5555 65.55 54.60 S450 - 95 67.10 S460 1,628 Bec + 059 289 15.50 19,40255.50 $550 5490 5495 - 90 6850 4% 1,251 Jad + 059 2575 2258 = 2.155i 58.40 58.40 55.95 $590 - 95 6850 5595 1,072 Feb nea + 059 2403 22.70 487vem SEIS ~ 1.10 65.50 59.00 120 Mer vee ane + 059 2385 21.90 8557 see 5518 — 1.05 84.75 55.75 re) dune 22.60 22.60 2260 + O59 2505 1982 8,075a vol fte vol Wed 7,514; open int 70.901, wee se we + 062 000 0.00 200Drange Juice Nee 15,000 Ibs.; cents per ir Ib, + 084 2444 1592 11,862May = 74.75 7450 7470 - 40 9215 7440 19.984 + 064 24.00 16: 584duly = 78.70 78.90 78.35 7845 ~ 45 9400 7800 4,383 + 065 2300 1700 5054Sent qh B19 B17 RIM - 40 OBR ROM 1758 4 O88 5 +1089Now 8470 8475 - 35 96.25 6000 2,350 int 452,586,a2 8775 ~ 35 97.00 60.20 116 Heatin Ol No, 2 (NYM) 42,000 gal; $ perEst vol 750; vel Wed 1,396 open int 28,196, —194. fea ig a8) pes + fie Ha‘A i ‘ a + i JMETALS AND PETROLEUM June 6835 ‘G005 670 072 + 000 43Copper! High ne Div. aaa -25,| 000 ibe gente per ib. duly 68606950 6830 6912 + 008 | 6,2732,989 Aug 68807005 6960-6967 + 0033 12.578ie 80.60 % ty - bat 3,780 Sept .7020 7090 .6960 7047 + 0063 5,80981.40 ee 8075 81.05 ~ 35371 Oct = .7080 719570807122 + 0068 3.076gre 8140 8180 a4) 8190 — 1987 | Nov 7120 7230 7120 7197 + 0078 275182.05 - 10,27? Qec 7200 7300 7175 7257 + 0063 12,968- 1173 lal2 7210-7320, -7200 7287 + 0088 2,708- . 3612 Feb 715072707135 7197 + 0083 2023- 0 4,157 Mar 6960 7075 6940 6007 + 0088 5,946- ; $66 ‘S194 (BB 8700 + 0033 897- ‘ 5,425 iby 6594 6660 6560 6612 + 0103 751- } . 505] June 8479 64806479 + O13 1,188- 90.00 8.40 2 duly 84596575 8459 6487 + ou 107tad $1.00 79.35 1,080 Aug 84848494 8484 6522 + Ba 116- 8270 8155 237 | Est vol 42,834; vol Wed 41,457: open int 1 ih i- 89.60 81.55 1 Gasoline-NY Unleaded inva, 42,000; $per- 50 8135 MB fe Set A700 BHD or 0009 25 33,6006205. = 86.90 860 S24 y 8826 oe 2500 6814 + “Door Meee 78a) Bay73islet gob vol Wad 11,181: open int 71, a + 1.582. dune 8455 8540 8430-8509 - 0001 9745 7520 = 16,362Gold (Cmx.Div.NYM)-100 Boy ots '$ per {roy 07, July 8325 8375 8280 8353 - 0005 9390 7600 10.175Mar ow 250 274.50 257.50 8 | Aug 8140 8150 8060 8128 - 0014 9150 7480 13.610Apr 26260 26360 25054 20030 - 260 30500 265.10 6422 | Sept 77a) 7e70 7780 7839 — 0021 8490 ‘7300 17026June 284,90 265.70 251.30 26230 - 260 447.00 258.20 27.409 | Oct 7490 7490 7490 89 - = 7950 6800 1,280‘Aug 286.00 266.00 283.60 28360 - 270 32200 2595) 5,532 How 1275 72157275 7810 6660 1,382Oct 286.00 266.50 285.50 265.10 - 260 28460 28200 1,733 has ~ = ton 74706650 70tDec 269.50 289.50 257.00 25640 - 290 420.50 264.10 6,560 te vol 30,025; vol ‘Wed 32,906; open int 128,002, +2123,Ju02 272.00 272.00 272.00 270.20 - 3.10 365.00 20930 4,457 Natural a8, on 10,000 0 MMBtU.; $ per MMBtu'sDec 276.10 276.10 276.10 274.20 - 340 358.00 276.10 2.007 87h 497 + ONG 6940 2120 38.089NOS ae awe 208.20 —- «3.50 $98.00 28150 £032 lay 5010 4920 4960 + Y 6220 2113 29,702Dec 265.00 285.00 285.00 263.30 - 3.70 359.20 285.00 1,806 dune is 5.070 4.975 gap - 008 6140 2095 19.122jut . on 288.10 - 3.90 355.00 20030 ©1470 duy = 5.100 5.110 5.020 - O16 6140 2005 15,476232.90 — 4.10 38800 909.00 1424 | Aug 5.009 5130 5.040 2h = 21 8005 2102 23.186ee vt a2, vol Wed 42/659: open int 123,480, ast. Sent 5079 5100 5030 504% - 021 6040 2137Platinum m (NEM) 50, oy or er. Per troy oe 5.088 5.110 5.030 i - 021 6050 2133 a7.th2Apr 582.1 - 4 sign 550.50 5,502 Nov 6.280 5.280 5.160 5185 - 019 6140 2275 12521duly 580.00 580.00 575.00 Ey - 4.20 630.00 587.00 1,567 Dec 5.060 §.360 5.250 5305 ~ O19 6.270 2415 14.547Est wl 773 vol Wed 496; open int 7.261, -114. Ja2 5.420 6.420 5.320 5.340 2.450 10.928Silver {orm Div NVM) 6, 000 toy 02; ents 3 “ah Feb 5.190 51% 5.140 5145 6 2440 = 8.387Mar 5S 442.5 = 10. 124 Mar 4.880 4.890 4830 4.852 5.730 2360 19,059May $47.0 447.0 tao a - it 49830 4d) 4520 4440 4508 - 009 4.920 2200 7178duly 4465 4485 4980 (4392 - 105 ao ‘oan 9,286 4.320 4.450 4.320 4422 - 009 4.775 2350 11,249Dec 458.0 4580 4470 4470 - 105 6800 4470 5502 dune 4.420 4.460 4400 4439 - 009 4.770 2345 8,19202 465.0 485.0 465.0 456.7 - 103 5590 8 Stt duly 4.486 4.510 4.440 4.485 = 011 4750 2.385 5,707Dec 470.0 4720 ane 4839 - 103 6130 1,965 Aug 4.510 4520 4480 4499 - Off 4.770 2412 12,324DcG3 485.0 485.0 4850 4743 - {3 585.0 ip 349 Sel 4482 4590 4.450 4481 - 011 4.770 2423 6,387Dold 4829 - 10.3 3600 4965 = 741 447 4490 4457 4.476 - O11 4785 2.485 8Est vol 11,000, vol Wed 5,249 Open int 73,524, +486. Nov 4587 4.587 4550 4586 - O11 4890 2610 3,750Dec 4693 4693 4850 4692 - 011 5010 2720 6.587
 
 
 
(continued on next page)30 : CHAPTER 2
 
Table 2.2 (continued)
 
   
 
 
x ~ OY 5049 2790 11.155 dune 210.00 21225 208.00 210.25 - 4.50 289.00 166.00 11,724i 601 - 011 4874 2695 6288 duly 211.50 213.00 210.50 211.50 - 4.75 254.50 206.00 y- A3B — 011 4.710 2705 = 8237 Aug 24375 213.75 211.75 212.75 — 4.25 248.25 206.25 3070vy AZT ~ O11 4520 2810 © 5,496 Sep 214.50 21475 21300 21400 - 3.75 244.75 184.00 3.097y L217 — 011 4490 2630 4.043] Oct «215.00 216,25 213.50 21525 - 3.25 261.50 18600 2.238ww 4286 - 011 4400 2610 2.173 Nov we ae ae 21600 = 3.00 264.00 214.00 2160ow 486 = 01 4580 2 4022 Qec 215.00 217.50 214.50 21650 - 275 24000 21325 8,956f ww 4904 ~ O11 4535 2970 4,047 JaQ2 217.25 217.25 216.25 21650 - 275 240.00 214.00 2.8644 302 — Ot 4445 3070 © 1,440 Feb toe tae an OI 2.50 221.00 214.00 1,9164 310 - O11 4455 3 4,198 Mar eet 2.25 245.75 195.00 3514423 44 — O11 4873 3835 1.36 dun 202.50 202.50 202.00 202: 2.00 228.00 18200 2,5584550 4.560 - O11 4820 3960 1413 ec 202.50 203.00 20250 202.50 - 2.50 210.25 181.00 5304590 4,600 — Otr 4680 3950 2,508 Est vol 35,000; vol Wed 22,619; open int 87,611, +500.. w=» 4450 - O11 4760 4410 2,060ES vl aia wl He 1256; opm int 31082, +122,* ; open int , #1212,Brent Crude {IPE) 1,000 net bbis.; $ per bby.Som iS UP OPE LE EE oy aw | EXCHANGE ABBREVIATIONSlay 25.05 25.22 24.82 25.01 + 0.17 3195 2318 61,673 .June 25.35 25.47 24.86 25.22 + 0.09 31.50 1355 50655 (for commodity futures and futures options)ie Be Be oy feos ft Gb) SS Gee an | CANTOR-Cantor Exchange; CBT-Chicago Board of Trade;BB B53 9H 19 + O10 WA 1835 10891 CME-Chicago Mercantite Exchange, CSCE-Coffee, Sugar & Co-Oct «517 BA? 2499 25.05 + 03 2845 2275 868 coa Exchange, New York; CMX-COMEX (Div. of New York Mercan-Nov 2495 25.00 2460 2487 + O17 2704 2315 4,057 tile Exchange); CTN-New York Cotton Exchange; DTB-DeutscheDec, 3a 380 a ae + a 2x Be 48s Terminboerse; FINEX-Financial Exchange (Div. of New York Cotton: + 3 ‘ Exchange; IPE-international Petroleum Exchange; KC-Kansas CityFed 2401 2401 2A01 2419 + 021 25.21 aH 1214 Board of trade; LIFFE-London International Financial FuturesNw ~ ~ ” Be ? 2 Be i 5 is Exchange; MATIF-Marche a Terme International de France; ME-Dec 22.90 22.90 2290 203? 4 045 7558 1735 8964 Montreal Exchange; MCE-MidAmerica Commodity Exchange;Est vol 105,000; vol Wed 105,000; open int 232.383, +703, . MPLS-Minneapolis Grain Exchange; NYFE-New York Futures Ex-Gas Oll (IPE) 100 metric tons; $ per ten change (Sub. of New York Cotton Exchange); NYMNew Yorkr 208.00 212.00 208.50 209.25 - 450 28450 181.00 29.838 Mercantile Exchange; SFE-Sydney Futures Exchange; SGX-Sin-208.00 211.50 208.25 200.00 - 5.00 27050 187.50 12,648 gapore Exchange Ltd.; WPG-Winnipeg Commodity Exchange.
 
Source: Reprinted by permission of Dow Jones, Inc., via copyright Clearance Center, Inc.© 2001 Dow Jones & Company, Inc. All Rights Reserved Worldwide.
Lifetime Highs and Lows
The sixth and seventh numbers show the highest futures price and the lowest futures price achievedin the trading of the particular contract over its lifetime. The May 2001 corn contract had traded
for well over a year on March 15, 2001. During this period the highest and lowest prices achievedwere 2824 cents and 206} cents.
Open Interest and Volume of Trading
The final column in Table 2.2 shows the open interest for each contract. This is the total number ofcontracts outstanding. The open interest is the number of long positions or, equivalently, thenumber of short positions. Because of the problems in compiling the data, the open-interestinformation is one trading day older than the price information. Thus, in the Wall Street Journal ofMarch 16, 2001, the open interest is for the close of trading on March 14, 2001. In the case of theMay 2001 corn futures contract, the open interest was 186,129 contracts.
At the end of each section, Table 2.2 shows the estimated volume of trading in contracts of allmaturities on March 15, 2001, and the actual volume of trading in these contracts on March 14, 2001.It also shows the total open interest for all contracts on March 14, 2001, and the change in this openinterest from the previous trading day. For all corn futures contracts, the estimated trading volumewas 103,000 contracts on March 15, 2001, and the actual trading volume was 60,060 contractson March 14, 2001. The open interest for all corn futures contracts was 431,377 on March 14, 2001,up 1,845 from the previous trading day.
Sometimes the volume of trading in a day is greater than the open interest at the end of the day.This is indicative of a large number of day trades.Mechanics of Futures Markets 31
Patterns of Futures Prices
A number of different patterns of futures prices can be picked out from Table 2.2. The futures priceof gold on the New York Mercantile Exchange and the futures price of wheat on the ChicagoBoard of Trade increase as the time to maturity increases. This is known as a normal market. Bycontrast, the futures price of Sugar—World is a decreasing function of maturity. This is known asan inverted market. Other commodities show mixed patterns. For example, the futures price ofCrude Oil first increases and then decreases with maturity.
2.6 KEYNES AND HICKS
 
We refer to the market’s average opinion about what the future price of an asset will be at a certainfuture time as the expected future price of the asset at that time. Suppose that it is now June and theSeptember futures price of corn is 200 cents. It is interesting to ask what the expected future priceof corn is in September. Is it less that 200 cents, greater than 200 cents, or exactly equal to 200cents? As illustrated in Figure 2.1, the futures price converges to the spot price at maturity. If theexpected future spot price is less than 200 cents, the market must be expecting the Septemberfutures price to decline so that traders with short positions gain and traders with long positionslose. If the expected future price is greater than 200 cents the reverse must be true. The marketmust be expecting the September futures price to increase so that traders with long positions gainwhile those with short positions lose.
Economists John Maynard Keynes and John Hicks argued that if hedgers tend to hold shortpositions and speculators tend to hold long positions, the futures price of an asset will be below its
expected f future spot price. This is because speculators require compensation for the risks they are
bearing. They will trade only if they can expect to make money on average. Hedgers will, losemoney on average, but they are likely to be prepared to accept this because the futures contractreduces their risks. If hedgers tend to hold long positions while speculators hold short positions,Keynes and Hicks argued that the futures price will be above the expected future spot price for asunilar reason.
When the futures price is below the expected future spot price, the situation is known as normalbackwardation; when the futures price is above the expected future spot price, the situation isknown as contango. In the next chapter we will examine in more detail the relationship betweenfutures and spot prices.
2.7_ DELIVERY
 
 
As mentioned earlier in this chapter, very few of the futures contracts that are entered into lead todelivery of the underlying asset. Most are closed out early. Nevertheless, it is the possibility ofeventual delivery that determines the futures Price. An understanding of delivery procedures istherefore important.
The period during which delivery can be made is defined by the exchange and varies fromcontract to contract. The decision on when to deliver is made by the party with the short position,whom we shall refer to as investor A. When investor A decides to deliver, investor A’s broker issuesa notice of intention to deliver to the exchange clearinghouse. This notice states how many contractswill be delivered and, in the case of commodities, also specifies where delivery will be made and32 CHAPTER 2
what grade will be delivered. The exchange then chooses a party with a long position to accept
deliveryGeuvery.
Suppose that the party on the other side of investor A’s futures contract when it was entered intowas investor B. It is important to realize that there is no reason to expect that it will be investor B whotakes delivery. Investor B