Trading in the Spot Month

What this video covers

• What the spot month is: the contract month closest to expiration, also called the nearby or front month, and why it becomes eligible for physical delivery
• How a futures contract changes character when it shifts from deferred months (purely paper) to the spot month (physical delivery is live)
• Why speculators typically exit the spot month by rolling to deferred months or going flat, and why commercials (hedgers) are the traders who remain
• How the exodus of speculators drains liquidity, rolls open interest forward, widens bid-ask spreads, and makes large orders harder to fill
• The direction of spot month speculative position limits: they get tighter (smaller), not looser, as delivery approaches
• Why spot month limits are keyed to estimated deliverable supply, and how the Commodity Futures Trading Commission (CFTC) and exchanges enforce stricter caps to prevent corners and squeezes
• The exam trap answer that says limits expand near expiration, and why that is backwards