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Month-end Approaches

Minneapolis, MN | July 28, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC

With options expiration mid-week and futures rolling to the October contract, exposure levels offer insight into this week's trading ranges.

Three Things

  1. Month end brings us another chance to consider how the mechanics of market makers’ risk management obligations dictate very short-term market movements.

  2. The September-October roll is nearly complete. October open interest overtook September by mid-month, with almost identical daily volume since that point. At this point, September’s daily volume matches or exceeds open interest as traders close or roll positions forward.

  3. Open interest exceeded 276k contracts for the September contract month in Brent options. Net exposure consolidated between $75 and $85, with substantial net exposure levels within that range ($78 and $83), which September futures have traded around during recent sessions, especially the $80 mark, which appears to be technically strong.

Dealers and Traders Closing Positions

Over the last two weeks, net movements in both open interest and positioning have been a bit deceiving, especially if you follow analysts that include the options positions in their Commitment of Traders observations. Swap dealers have been consistently closing futures positions, both long and short. So, while the net position is moving shorter, in reality, exposure is falling. Over the last four weeks, dealers have closed more than 57k futures contracts, dropping their representation in total open interest to a combined ~16% of the total 2.24mm open futures contracts.

*This summary is based off July 23, 2023

A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!

Meet the Author!

Phone: +1-832-413-3124

Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.

He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.

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