Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Hi Romel, I don’t mean to question your hypotheses. It makes perfect sense. I am blind to the activities in the physical market and I depend on fellow traders like you for information. It has been my observation in futures that when origin sells it does so in forwards. They may sell in the front months as well but it is not noticeable. When they do sell forwards, the spreads tend to rally. I apologize if I’m oversimplyfing but the following is an example:
May18 is 118.00 ask
May18/Dec18 spread is -7.50 ask
Origin offer in Dec is 125.50
Someone buys the May at 118.00 and ICE, by means of what they call the Emplied Engine, the May sale is matched with the spread as the engine buys the spread. And so, spreads are firmed as a result of origin selling.
The situation yesterday was that spread bids were being hit. So from my point of view there was no evidence of origin selling. Further, the Dec18 OI dropped. I think that it would increase if origin were hedging.