Why commerce SGX Rubber? | SpreadCharts.com

Final time, we launched the SGX information within the SpreadCharts app and briefly described the historical past of commodity buying and selling in Singapore. At this time, we are going to take a more in-depth take a look at essentially the most fascinating futures contract from dealer’s perspective – the Rubber futures.

Earlier than transferring on, I need to make clear that there are literally two rubber futures contracts traded on the SGX – the TSR20 and RSS3. Each are produced from pure latex harvested from rubber timber. Technically Specified Rubber (TSR) is liquid latex which has been allowed to congeal naturally and reformed into blocks that can be utilized in tyre manufacturing. Ribbed Smoked Sheet (RSS) is liquid latex rolled into sheets and put via a smoking course of.

What shall be vital for us is that TSR20 is far more liquid contract than RSS3, so I’ll focus solely on the TSR20 contract to any extent further. Detailed specs for each contracts are listed on the finish of this text.

Why you ought to be interested by SGX Rubber:

• Bodily settlement
• Seasonal habits
• Small contract measurement
• USD denominated

Bodily settlement

Futures contracts may be settled both financially or bodily. Bodily signifies that the contract should be settled by the precise commodity upon its expiration, not merely with money. Why you must care about this, in the event you’re only a dealer? Properly, bodily settlement ensures that the contract intently tracks the worth of the underlying commodity. It results in fewer failures in futures convergence to identify costs at expiration, and the contract is extra fashionable amongst hedgers. The explanation you must care is that as a speculator, you need the futures’ worth to precisely mirror the true situations within the bodily market. Think about getting into a commerce and failing to revenue from it, even when the market evolves as you anticipated.

Nonetheless, this generally is a double edged sword typically. Keep in mind the detrimental crude oil costs in spring 2020? Properly, it occurred simply on the WTI contract, primarily resulting from its bodily settlement. In contrast, Brent futures, that are financially settled, didn’t expertise detrimental costs throughout the identical interval.

While you commerce a bodily settled contract, you commerce an precise commodity. Such contracts are uncommon in Southeast Asia, as bodily supply requires intensive storage and loading amenities. That’s why most contracts are cash-settled.

Seasonal habits

Rubber reveals notable seasonal developments. If you happen to comply with us for a while, you already know that we don’t contemplate seasonality as one thing dependable. It does fail terribly kind time to time. However, it could function an vital tailwind on your trades if different information is aligned with it. And rubber exhibits robust seasonal patterns.

For example, a pleasant seasonal uptrend has simply concluded, which the worth adopted relatively properly this 12 months. And now, a powerful seasonal downtrend is starting.

This seasonal habits is obvious not solely in outright futures but additionally in interdelivery spreads.

Small contract measurement

This can be a large benefit for retail merchants. Futures contracts are typically giant for historic causes. To begin with, solely skilled merchants and hedgers traded them within the twentieth century. These have been normally giant corporations and the contract measurement was tailor-made for them. Furthermore, buying and selling commissions have been a lot greater earlier than the appearance of digital buying and selling and buying one large contract was less expensive than shopping for a few smaller ones.

That is not the case. Now, smaller contracts have gotten the norm, providing extra flexibility to hedgers and attracting speculators who present the a lot wanted liquidity. Even the CME Group realized it the laborious manner with some area of interest commodities.

The SGX rubber futures contract measurement is simply 5 metric tonnes, translating to a level worth of solely $50. To place this into perspective, the months-long buying and selling vary for this contract represented a mere $500 change in contract worth! Typical values for some US futures contracts throughout a comparable interval could be a number of thousand {dollars}.

Such a small contract measurement permits merchants to make the most of their threat administration with out resorting to excessively tight cease losses. It additionally permits the buying and selling of a number of contracts even by retail merchants, which is important for correct cash administration

And do you do not forget that unfold on the seasonal chart a couple of paragraphs above? Its worth change over two months is value simply $80!

USD denominated

Regardless of being traded on the SGX, a Singaporean change, the Rubber futures are denominated in US {Dollars}. This eliminates forex threat for US buyers and simplifies margin calculations. And even for merchants from different international locations, changing cash to USD is mostly simpler than changing to SGD.

I hope you now perceive why we’re so excited by including SGX Rubber information to the SpreadCharts app. Beneath, we connect full contract specs for each the TSR20 (artificial) and RSS3 (pure) contracts.

We have been in a position to signal the license with the SGX and add this new information into the app solely because of our premium subscribers. If you wish to see extra information within the app, contemplate buying the premium subscription.