Deal4Free Con

[JonnyT]

Hi folks,

Deal4Free have really really annoyed me today.

I went long Corn on the September contract a while back. They did not offer the December contract.

Today I find they have closed my Sept trade and opened one up on the December contract. Inccidentally the December contract magically appeared tradeable today.

What a nice little earner. Two more spreads.

I have compained without resolution. In my mind they are offereing a misleading service as they do quote Corn, September so how can they justify closing it in the middle of August? Further how can they justify rolling it over?

I am making a formal complaint to the regulation bodies as I consider this to be misleading marketing at best, downround criminal at worst.

JonnyT

 

[iq200]

JonnyT,

You are right that is a p*sser! But then they are there to make
money mate!

I have been doing odd bets since last year and I have found
it not to be a very pleasant experience spreadbetting. Infact
I now intend to only trade stocks and later maybe futures
thro a DA broker.

If its any consolation I transferred all my money out of my
D4F account this week. I read somewhere that you had to have
a min of £1000 in the account. So I was prepared to close the
account. But they didnt say anything.


Regards,

Imran

 

[Tullibody]

Suggest you read the d4f dealing guide again -- specifically section 6.1 which by my reading anyway, states that bets on futures contracts are automatically rolled over on expiry unless instructipn to close received. Presumable this was last notice day for Sept corn hence the rollover. Might be that they only offer a bet on most active month for these contracts which is just as well as volume elsewhere can be tiny and the risk of getting whipped out enormous.

 

[ianshep]

Paul,

It's all stated quite clearly in the dealing guide. The expiration date dates for each commodity and the close/rollover dates for the D4F equivalents are all there in the tables, so I can't see that they are misleading anybody.

The practice of only offering the front month is pretty useless. However, they've only dealing in commodities for a few months so maybe they will improve. The front month in 'deliverable' commodities is often v. dull compared to further out contracts and only having access to the front month limits the available trading strategies considerably.

As for rolling over, I suppose they have to standardise on one thing or the other. Rolling over is almost always the right thing to do in stocks, indices, gold and financials and almost always the wrong thing to do in agriculturals!

Also, I don't think they charge the spread for rolling over, just a 'cost of carriage' financing charge. Or is my memory failing me? (I should know this because I use them!)

 

[oatman]

If you're a spec you should be in 3rd month, or 2nd if it's not liquid enough. Don't believe spot is dead or dull. Never be in the spot unless you know what's going on. Beware of a "play" on the spot. You must know fundamentals in commodities.

Cheers

 

[2468steve]

oatman,
I've never traded and don't intend to trade commodities,don't understand enough about it,but what are the parameters of a limit move.Does a limit up or down apply to all contracts,near and far,as well as the spot.
Would you mind explaining the "play".Thanks
cheers

 

[oatman]

First of all, Jonny, look on the bright side. If you'd been trading futures you could have been the proud owner of 5000 bushels of corn in your local warehouse.
Seriously, I just checked it out and expiry is 15th calendar day preceding the trading month, being ZHKNU, so they had to get you out. Basis that I would keep an eye on volumes as to when to move forward.
Limit moves vary between markets. I thought most had been abolished. The original reason for having "Limits" was to give the Clearing House time to make margin calls in large, fast moves. It also gave time for the market to take a breath and compose itself. Often, markets that are pushed to a limit will reverse on re-opening ie. they've lost momentum. However I've also seen Sugar go limit up for days on end. You couldn't trade. It just formed a pool. If you wanted to buy, you put your bid in the "pool". If any selling entered the market, you might be lucky enough to get something.
Limits do not apply to spot month.
A "play" more than likely would be a squeeze(shortage). More difficult to perform now as there are rules against "cornering" a market. Ask Bunker- Hunt. A liquidation only directive was placed on the NY Silver market.
Spot or near positions often have a spread play to the forwards based on availability, crop forecasts, weather, shipping problems, politics, you name it!
Oh well, there's something to chew on, I've rambled enough,

See you later,

 

[2468steve]

Oatman,
thanks for reply

 

[JonnyT]

Hi Oatman,

I thought the commodity futures finished on the third Friday of the trading month?

My point is that on the dealing page it says Sept 2003. It clearly is not. I accept the dealing guide says the 15th of the preceeding month so I think it is all rather misleading and wrong.

I spoke to deal4free tonight and they said the real problem is that there software can only support one Commodity contract at a time i.e. cannot have a Dec ad Sept contract running together.

All I ask for is absolute clarity when dealing. I was onlt at £1 per point so its no big deal but the principle is.

JonnyT

 

[TBS]

Hi JT,

I didn't realise you were in the front month when you mentioned corn the other day.

Rule 1 of speculative commodity trading:

NEVER play the front month - leave that to the real users. The speculative action usually takes place in month 2/3.

In the case of corn December is the spec month - and has been since March. If D4F are only offering the fronth month, watch out, you will get suckered into trading harvest months which are traditionally the most dangerous for specs.

Gotta get to know your product a little with the commods, especially when harvest periods are happening and where the speculative open interest sits - you can see this on the bar-chart site

http://www2.barchart.com/dfutpage.htx?sym=c

 

[JonnyT]

Hi Sandy,

I'm just dipping my toe in the water. I wanted to buy Dec but Deal4Free only offered Sept. Didn't expect them to roll it over on Aug 15th. It does actually say so on the Statements though I don't look at them!

To me Sept Corn means it ends in Sept, anything other is misleading. I am putting this argument to the FSA as a formal complaint.

With Deal4Free you don't actually buy the underlying so I think they are actually guilty of false advertisement.

JonnyT

 

[oatman]

There's often good money to be made in commodity spreads.
You won't be able to take advantage with Deal4free.

 

[2468steve]

I occasionally trade gold/silver and the expiry on these is similar
Current expiry for Oct gold is :Last day of Trading : 3RD FRIDAY (OR PREVIOUS BUSINESS DAY) OF PREVIOUS MONTH ...19 Sept.
I'm interested to find out the reason for these lags in time....does it go back to times past when it could have taken weeks to deliver the commodity to the buyer if necessary

 

[oatman]

Originally, you could trade spot months right into the last trading day of the actual month, which makes sense. The position would often expire mid afternoon on the last day. After all, the position was for delivery and as such, in London anyway, was always used that way. I don't know why they brought expiry forward. Sorry,


Cheers

By the way, If you wanted to "tender" ie. deliver you must have documentation of warehousing, quality and origin etc.

 

[JonnyT]

CBOT Corn the underlying I was trading has the following rules (from CBOT site): http://www.cbot.com/cbot/www/prod_detail/0,1499,14+58+138+10,00.html

Contract Months
Dec, Mar, May, Jul, Sep

Last Trading Day
The business day prior to the 15th calendar day of the contract month.

Last Delivery Day
Second business day following the last trading day of the delivery month.

Therefor was I wrong to assume that Deal4Free would run the contract until then? I think not. They should not quote Corn Sept if they terminate the contract in the middle of August. I will be seeing if the FSA agree. If they don't then I will go over there heads aswell. This really is a point of principle to me.

JonnyT

 

[2468steve]

I assume it may be because in times past grains,wheats etc were stored in warehouses around Chicago,the centre of the mid-west and hub of railway network across US.This evolved into CBOT and CME.
For any farmer selling forward for say Sep delivery in say,San Fransisco,his product would need to be in Chicago 3-4 weeks prior to delivery to ensure it reached the buyer on time.
Just a guess on my part tho'....

 

[2468steve]

jonny,
looking at the CBOT link it seems you have a valid case.Have you spoke to Deal4Free on why they rolled it over...what did they say?

 

[JonnyT]

Hi,

I have spoken to deal4free. The answer is that there system only supports one quote per commodity. They transfer over because of volume. I then told them that if that was the case they should have done it a month ago...

One can then argue as they are Market Makers and you don't actually buy the underlying that this is totally irrelevant.

My view is that if your dealing system quotes Sept for a contract then Sept it should be. No ifs or buts.

JonnyT

 

[moa]

Jonny

was just browsing the site and saw your post from August. This is a bit late but hopefully you may find it of use for the future.

You are perfectly correct in noting the formula for the last trading day however as a speculative trader the relevant date for you is the first notice day (FND). If you were long the futures this is the date from which holders of short contracts can notify their intention to deliver the physical commodity to you under the terms of contract specified by the exchange. Obviously you don't want that and if that happened you would have to pay a fee to have the delivery notice reassigned to someone else which is costly. So as a spec trader you really want to roll your long well before FND. In this instance FND was Fri 29 Aug. As D4F will most probably be hedging in the futures they obviously don't want this risk either, neither would they want to offer a spreadbet to someone which expires just a day or two later which I would suppose is why they rolled a couple of weeks early. I note that at the time they rolled your position the volume in the Dec futures contract was substantially higher than the Sep so as far as liquidity goes it was the right move (don't forget bad liquidity costs you spread points too).

As an addition to the above note that since delivery depends on the notice given by the short you could conceivably hold a short futures position past FND and right up to LTD before closing out to avoid delivering. However in practise this is dangerous as in this interim period particularly shorts can be 'squeezed' by longs who are prepared to aggressively bid up the price if there are any shortages or if they just know there are 'weak' shorts in the market (which as a spec you are) who will be forced to turn around and buy rather than offset their obligation by delivering the physical.

Regards

 

[Rainmaker]

Just closed my d4f account as they have cost me a small fortune due to cock-ups and system failures. Wouldn't touch them with a barge-pole.