I notice that the price of far of expiry dated in the futures market lag behind the spot rate considerably;
Dec07 wheat 834.25 ish
Sep08 wheat 669.75 ish for example.
What is the reason for this? I am aware that far off expiry dates have daily limits on movements, but can't futures contracts be rolled over to the new month? In which case why not just have a rolling contract like Fx? What is the advantage of dealing in different contract months? Is it possible to hedge exposure by buying and selling different contract months, or would options be used instead?
Dec07 wheat 834.25 ish
Sep08 wheat 669.75 ish for example.
What is the reason for this? I am aware that far off expiry dates have daily limits on movements, but can't futures contracts be rolled over to the new month? In which case why not just have a rolling contract like Fx? What is the advantage of dealing in different contract months? Is it possible to hedge exposure by buying and selling different contract months, or would options be used instead?