Digging for gold in gold spreads

摘要

Trading is about finding opportunities that provide the right balance between risk and reward. There are various strategies available to traders seeking a potentially favorable ratio, such as one strategy in gold futures. The transaction is the purchase of a gold futures contract for delivery 12 months or more forward and the simultaneous sale of a three-month gold futures contract at the Comex division of the New York Mercantile Exchange. Gold is a carrying charge market. That means that there is a difference between the price of one month and another month; this difference is the carrying charge. That charge consists of the interest rate and storage and insurance fees. Simply stated, the carrying charge consists of the rate of interest per annum plus the cost of storage and insurance over the course of a year. To figure the charge on a month-to-month basis it is divided by 12.