Trading LME

[kianti]

I'm new to LME and quite confused.
So far I've learned that (please correct me if I got it wrong):
For futures variation margin is a cost/revenue.
For LME forwards variation margin is a credit/debit
For futures you have an expiry date that is fixed for every contract.
For LME you have a prompt date (expiry) that is changing every day.

Now the $1.000.000 question: today I've bought 1 LME Lead 3 mth (trial account ) at 2200.00 and prompt date 5-nov-10.

Let's say I need to close my position in 5 days, I would sell again the 3mth contract with prompt 12-nov-10. Is my position closed or do I have to do something else.

Thanks again for any help.

Best regards, as ever

[Chris67]

Kianti
It i smy understanding - and I may be wrong that if you did that you would have a position still running - 5 vrs 12 November - so when you close the position out you will need to close it against the 5th Novemeber
It is also my understanding of why trading LME is a tough one because BLOX will assume you are in the 3 month contract every day and so the price will not be accurate - i.e. 3 month tomorrow is not the same as 3 months today - hence when you backtest LME metals your not always trading what you tested ?
C
p.s Please correct me if Im wrong anybody

[kianti]

Kianti
It i smy understanding - and I may be wrong that if you did that you would have a position still running - 5 vrs 12 November - so when you close the position out you will need to close it against the 5th Novemeber
It is also my understanding of why trading LME is a tough one because BLOX will assume you are in the 3 month contract every day and so the price will not be accurate - i.e. 3 month tomorrow is not the same as 3 months today - hence when you backtest LME metals your not always trading what you tested ?

Thanks Chris,
I think you're right, I'll have to close with the 5-nov-10 prompt. I don't see price quoted for contracts different from the 3-months, maybe because I'm on a trial version.
The second part of your answer seems more tricky: 3 months tomorrow is not the same as 3 months today.... cost of carry comes into play.
Most of the futures contracts are in contango, while LME metals in backwardation,if I'm not mistaken.

Thanks for your answer, I'll have to ask a broker or the local huge producer of semi-finished copper products.

Best regards, as ever

[kianti]

I'm scanning my PC and I've found a couple of things about LME.
Discount Factors for LME and an old Excel sheet I made with Aluminium prices.