This Week in Petroleum 11-15-07

2nd Update

Now, 30 minutes after the release of the report, the market is starting to react, and oil prices are falling. Are traders really that slow to react? Or is that some kind of mirage because there is a delay in getting trades executed and reported? I get the impression sometimes that I could make a small fortune trading within the first half hour after the release of the inventory report. Seriously, someone who trades, please fill me in on this. With a big surprise like this, you can probably predict the direction prices are headed short-term with a high rate of success. But the reaction seems to develop very slowly. My question: If I placed a trade at 1 minute past the release of the report, when would I expect it to execute?

Updated following the release

Surprise, surprise. I don't know that anyone expected a big rise in crude stocks, but that's what we got:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 2.8 million barrels compared to the previous week. At 314.7 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 0.7 million barrels last week, and are at the lower end of the average range.

Crude imports showed a big jump, but are still down over this time last year:

U.S. crude oil imports averaged nearly 10.5 million barrels per day last week, up 831,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 9.7 million barrels per day, or 387,000 barrels per day less than averaged over the same four-week period last year.

And why were gasoline inventories up? As I said before the release, if utilization goes up, gasoline inventories should go up. Utilization was up to 87.7%, a sharp rise from last week. The prediction from the analysts didn't make much sense to me - refinery utilization up a good bit and a draw on gasoline inventories.

I didn't expect crude inventories to head up before next week. The market hasn't reacted much to this, which is surprising. Crude prices were down slightly before the inventory release, but typically I would expect a suprise of over 3.5 million barrels of crude to move the market more. So far, the market is barely reacting, but maybe I haven't given it enough time. I think I would have been prone to go short 30 seconds after I saw that report.

To be updated following the release of the report

This week's inventory report was of course delayed by a day due to Veterans Day in the U.S. Expectations are for another crude decline, which given the storms in the North Sea and the flooding in Mexico is a pretty good bet. Here were the predictions per Reuters:

A Reuters poll shows that Thursday's U.S. inventory data is expected to show crude stocks dropped last week by an average of 800,000 barrels, which would be the fourth consecutive weekly decline.

Analysts also expect 100,000 barrel draws in both distillate and gasoline stocks. Refinery runs were forecast to be up 0.5 percentage points.

(A poll by Dow Jones predicted a more modest 300,000 barrel crude decline).This week's report may not spur the typical market reaction. Oil prices rose on Wednesday, due to a combination of expectations of an inventory drop, as well as remarks from Saudi that they won't discuss a production boost at this weekend's OPEC meeting, but will instead delay that discussion until their December 5th meeting.

While a drop in crude inventories should typically favor a rise in price; 1). Some of that rise is already built in due to analysts' expectations of an inventory drop; and 2). The December WTI contract expires tomorrow, and there is a significant net speculative long interest that will probably be anxious to take profits. That may limit the upside. (There is also the factor that a large draw may cause crude prices to run up a few more dollars, but that would increase the pressure on Saudi to placate the markets at this weekend's meeting).

I do question the prediction that there will be a gasoline draw and a 0.5% increase in refinery utilization. Utilization has been lagging, but if the number ticks up this week, I would expect gasoline inventories to build. I think the recent uptick in gasoline prices will also cut into demand a bit, further improving the likelihood of a gasoline build. If utilization doesn't improve, then I would expect that we would see a draw on gasoline.

Of course gasoline stocks remain near record-low territory, so any negative surprises there could quickly impact prices. Gasoline prices have recently started to climb, but that climb has not kept pace with the climb in oil prices. Based on where gasoline inventories stand right now, it's going to take quite an inventory build at this point to avoid $4 gasoline in the spring.

Robert, you kind of have to watch it about trying to take a position within seconds after the report comes out. The market tends to shoot up or down very fast in the couple of minutes right after the report. If you place a limit order, it will probably not get filled. If you place a market order, it may get filled at a horrible price.

When the market is moving very fast, it's better to wait for the market to stabilize before putting in your order.

In a fast market, there's no liquidity--it just dries up. If the price is rising fast, sellers stop selling and wait for a higher price. If the price is falling fast, buyers wait until they think the selling has stopped.

The market will often overshoot right after the report, and then have a price reversal. That reversal is often a good time to make a move.

Also, remember, it's not just the inventory report that moves the price one way or another. Remember that traders are also thinking about which way the dollar is likely to move, what movements in the stock market are likely to do to the dollar, etc.

Also, remember that speculators often rely on signals that tell them when to buy or sell. They don't really buy or sell based on the inventory report, they watch other factors, like whether the price has risen or fallen to some longer-term moving average, or any number of other indicators or combination of indicators. For example, a very famous trading system that some large speculators are likely following has still not given a sell signal on oil.

there is enormous liquidity in WTI. I doubt Robert has enough umph to be able to put in an order big enough to have trouble getting a fill.

Even back in the days before electronic trading, you could call the floor guys and get an execution in seconds.

But I don't think the API/DOEs are good for much more than short term noise. They are horribly inaccurate. You really need to dig through them and compare rolling averages to see if they are actually saying anything meaningful.

If you have access to an online trading system then your trade should be executed and settled within seconds, provided you already have a confirmed balance or line of credit. If you are placing very large trades that might be different.

There are several reasons for varying reactions to events depends. Some traders are "fast twitch", i.e. they immediately compare to expectations and have a prearranged trading plan. Meanwhile analysts in the backroom can go over the fine detail and present a more nuanced view which may leads to different trading decisions.

A large source of volatility, and strange movements seemingly unrelated to the facts is down to herd behaviour. Traders look at what the market is doing, so you get positive feedback, which leads to chaotic behaviour.

It often seems like there is easy money to be made trading on speculation, but if there was you can be sure the big house with large resources would be hard to beat. I believe the best strategy for occasional traders is to trade on the fundamentals.

I wouldn't expect the report to have much impact on prices as, in sum, commercial inventory growth was a minimal 0.7 million barrels for the week.

A very "crude" way of looking at this is that it took an additional 5.8 million barrels or so of imports from the week before to produce marginal growth in stocks. Ouch.

I doubt that the 2.0 mb distillate draw is going to engender much cheer either.

In sum, distillate and gasoline inventories dropped 1.3 million barrels - a cool million barrels more than forecast.

Refinery utilization is up but products are down. Who'd thunk it?

It might take longer to process the heavy sour stuff that KSA has available as 'margin'. The API of imports is going up, which may reduce the light outputs.

not to be rude, but crude runs through a refinery at the same rate no matter what the source. Either you can run Saudi hihg sulfur crudes or you can't.

A lot of this is just noise. But it's not a surprise that heating oil is moving from primary storage (refineries) out to secondary and tertiary storage to get ready for heating season. Consumers are starting to think about filling the tanks for December. Heating oil distributors need their stocks ready to go. Americans don't fill up in summer so distributors aren't going to have expensive inventories just sitting around. The carry costs are painful.

Thanks for the correction

Are you looking at a delayed transmission (the one to the right is off by 30 minutes, though the time shown on the tracker is representative of when the trades occurred)?
The drop began at 15:20 GMT from $93.59 to $92 at 15:42 GMT. Now back up to $92.58 @16:38 GMT (30-minutes behind current time).

If I were at home watching on CNBC, I think there is no delay time.

So the joke starts like this ...

Four commodity traders are stranded on a desert island.
One of them figures out how to "profit" from their situation.

Robert, My name is Patrick Kerr I run a commodities brokerage specializing in energy trading/investing called OilGasFutures.Com...To answer your question if you placed a "Market" order 1 second after the report came out you could expect to be "filled" instantaneously, if you wanted to make sure you get filled at a specific price you can place a "Limit" order stating your price and you will be filled at the exact price you state (or better) if that price point is hit...Trading the inventory reports has presented some great trading/investing opportunities this year...we work with all levels of traders/investors---if you or any of your readers have any questions or need further explanation--let me know----Patrick Kerr

This is hogwash, and a sales pitch.

Anyone here can verify that you will not be filled instantly on an order placed 1 second after the report came out. You can verify it by trying it yourself on something like USO.

Go and try placing a sell order 1 second after a report shows a strong inventory gain. If you give a market order, which means no price specified, you will see an unusual delay in filling the order, even a dinky order like 100 shares of USO, and then the order will get filled at a bad price nowhere near what it was when you placed the order.

If you place a limit sell order at a price anywhere near what it was just before the report came out, the order will not get filled.

Trading the inventory reports has presented some great trading/investing opportunities this year...

Yeah, it has presented great opportunities for experienced traders to rip off newbies who believe posts like this.

Yo Moe - Thanks for that.


I am so disapointed in Americans right now that it's nice to see ANY display of righteous indignation.


This wasn't a blowout number, especially considering the recent drawdowns. The big selloff possibly came from a large commercial seller or European traders, where it was evening. Also as previously mentioned, other factors like stocks and currency fluctuations are present. Also have to look forward to Thanksgiving and tons of driving next week. We're already back up a bit.

I wonder which country didn't get the .8 mbpd imports that the US got extra? Or did worldwide production increase by over 6 million barrels during last week, with all of it going to the US?

The inventory neeps at speculate that it's oil that might have otherwise gone to China. California got a big increase, and China didn't import last month (or didn't import as much). Hence the shortages over there.


Our turn next month.

that implies a rather stark reality if correct. I sometimes think we are all going to burn.


Whac-A-Mole for anyone else who needs to figure out this very cute metaphor.

A woman playing Whac-a-mole.

Half (rough) the world’s oil traders live here in Geneva. They are often busy with others things like going home, eating out, gym, massage, clubbing, etc. Part of the local economy survives only because of them -it is said-..restaurants especially, ergo they are not as glued to their screens 24/24 as one might expect.

There are those windows, etc. there, time to spare, see also other posts. (That is without taking time differences etc. into account - I have no idea exactly at what hour whatever is published.)

I mean, these guys (no gals that I can see) are doing a hell of a lot other things.

Are you jaleous of the money they currently make to write things like this? I also live in Geneva but completely disagree with your statement. Traders do their job, follow their models, but do you seriously believe they are out of office when the TWIP is released and that it is the reason of the delay of reaction that Robert stated??

Let's have a glas of wine and discuss together.

borders on silly

No serious screen trader is off at the gym when stock reports come out. If all you do is trade physical oil from Russian to into the Med and don't run net positions, you might not care but that's a small subset of the population.

The refinery complex, which has been very good at making ULSD for the nation's trucks, has neglected Home Heating Oil and is now beginning to make HO. If people recall, the entire Distillate area fractured starting last year, with the new high standards for pollution controls via ULSD. (As an aside, Mercedes is coming out with a 40K sedan that will run on ULSD and get uber miles to the gallon. This is going to be very hot in Hollywood). The bottom line is that this week, we finally reached last years' levels in Heating Oil on a days supply basis. The cost however has been to total crude oil inventories, again, on a days supply basis. And also, to Gasoline inventories. Crude Oil and Gasoline inventories are now getting pounded even further below last year, on a D.S. basis. Of course, days supply is the only measure of inventories that has a sustainable effect on price

The continuing strength in European GASOIL as usual is telling. Also, there are problems in the Baltic and Black Seas vis a vis Russian exports, that are putting even more pressure on Euro-wide distillates.

In the next few weeks, I believe we will continue to pound oil inventories lower to make HO, because Europe is way too tight for the US market to try and pay their prices, to import their distillate here.

If we get a normal Winter temperature wise, Heating Oil is going to go crazy again, and Oil will go to 110.00 easy.

Warm winter, and oil could drop back to 80.00 or 75.00.

My current range for oil is 80.00 to 110.00. We have not hit that high number of 110.00 yet, but, it's in play. We are now in the paradigm of 100 dollar oil, even though we didn't quite get the print.

Traders and oil price watchers: the GASOIL contract on ICE remains my favorite tell on whether the action at NYMEX has any meaning on an intra-day basis. GASOIL has been uncanny all year in its ability to confirm, and even better--not confirm--moves in prices of WTIC at the NYMEX.


Whoa Moe, relax, you seem kind of angry and confused, since Robert was asking about the futures market and the execution of trades in the futures market-that is what i responded to, the futures markets are heavily regulated by two government agencies: the NFA and the CFTC, every order is recorded: it is called a "time and sales" report --every trade and time of trade is is easy to see and trace every order etc. as anyone with experience in the futures markets knows market orders are filled instantaneously---if your futures broker is unable to do than i recommed trying any other one since we all can do it these days---you can literally hold for your fill ---second as i said above if your limit order is hit, your order will fill at your stated price or better...if you feel this was not done you can easily ask for a time and sales report to prove your claims and ultimately get your fill---which is sort of silly because there is no reason not to fill an order that has been hit---in fact brokers like their orders to get filled and like to get the best prices for their clients----finally suggesting people try it themselves with USO is irreleveant since USO is an ETF and as such is classified as a security it is a completely different class of investment and has nothing directly to do with commodity futures, it is regulated by different government agencies, trades on different exchanges and requires brokers with a different license and is even taxed differently (futures get special 60/40 long term/short term treatment)...the reason i said the inventory reports have presented opportunities is because they have been making the markets move and opportunities similar to those that robert is describing pop up quite a bit...i suppose there are firms out there that try to screw people somehow but these days,but, due to heavy regulation etc. they dont last long...i've been brokering for 10 years and trading for even i mentioned above if anyone has any questions or needs further explanation they can contact me etc. Patrick Kerr, President of

I'm not saying the market is rigged, I'm saying the smart money exploits the dumb money.

Obviously if you place a limit order, it will only be filled at the stated price or better.

Robert specifically wants to read the inventory report, then place an immediate order, and make some money on that initial price move. What I am saying is that nobody is going to sell to him at a price where he can exploit that first move. The delay he describes in his post is due to this immediate short-term lack of liquidity, not to traders being stupid or slow.

I'm trading at the moment, but at the end of the day I will put up a minute by minute chart that shows the price moves after the report. Robert and others will be able to see clearly that the price moved as I described in my initial post--it tends to overshoot because of newbies who place market orders, then there is a reversal. As I'm typing this, the price has come back up quite a bit from that first delayed move down--that is the reversal I was talking about. That reversal presents a good buying opportunity if you believe the price is going to continue to go down. If Robert placed a market order a second or two after the report came out, he would have gotten filled at a much worse price.

I'll put up the chart after the trading today so all can see the move clearly.

And when I say dumb money I don't mean dumb people. Most of the dumb money comes from smart people who are just inexperienced.

I have to agree with Moe, the odds are heavily stacked against the small trader. Even if only because when a lot of orders are being placed computer systems slow down a bit.

You might be able to get orders placed 80% of the time, but missing the other 20% can kill you.

moe i do agree with you that the market often reverses its intial movement, which to me also represents a trading opportunity, i also agree that if you place a "market" order in a "fast market" you may get filled at a worse price...what Robert was describing above was the thrity minutes of trading after the report came out in which the market had yet to move ie he had thirty minutes of a non-fast market to get in at a price he liked, he then noticed after thirty minutes or so the market went down....on the flip side the market recouped much of its downward movement by the end of the day--so you both would have made out pretty good today on the strategies you both describe above...anyway, pk

Thanks for your response, by the way. I have seen a number of what looked to me like opportunities in both directions lately, but as I told someone on my blog when they said I should have acted on something I had said:

My situation is a bit more complicated. Two times in the past couple of weeks, I could have made a lot of money. I heard about the evacuation in the North Sea a good 24 hours before it hit the news. I felt like there was a 90% chance oil would pop up, and it did. But I can't trade on that information, as I would guess that would be classified as inside information.

Ultimately, I probably won't do anything about it. And I suspected part of the reason that it looks like the market is reacting slowly is that I am not getting real-time information. It certainly seems like there is a brief window of opportunity when there is a big surprise, because the market seems slow to react. But I am certainly not the only person to recognize this.

Actually there is no such thing as inside information in commodities markets - only in stocks. There are several "intelligence" companies that track events around the world for commodity traders. This is perfectly legal. The government might have rules against acting on its unreleased data however.

That's interesting, because I always assumed it would be illegal. Due to the nature of what I do, I am occasionally in a position to have information that is truly not public.

I told TOD Staff about evacuating the North Sea about 12 hours before it hit the news, and I had known about it 12 hours prior to that. Following Hurricane Katrina, I knew that the damage to the Mars Platform was severe well before it hit the news - and I told my friends and family to get out and fill up their gas tanks. Those events don't happen on a daily basis, but there are probably 5-10 times a year that I come across information early that is almost certain to cause a quick move in the market.

Farmers regularly trade commodities both to hedge their cash flow, and speculate based on what they hear and know about their industry.

If it isn't something specifically about your employer (e.g. you work for BP and you trade BP stocks), or a clear market-moving number (a government statistic) it is probably OK. Technology-employed people often trade technology stocks.

Information a good reporter could find out is probably OK. But I'm not a securities lawyer. Jurisdiction will also matter as well.

No, you can watch it in real time and you'll see the same delay, and the reason is that there's no trading--no liquidity--for a time after the report. Then you can see the skid in price when all the market orders get filled at a new price set by traders who are taking into account whatever is in the report.

I can't figure out how to get the minute-by-minute chart back to that time of the day for today, so I'll post a minute-by-minute chart that shows the time period around next week's report. You'll see the same thing week after week after week.

The snapshot example chart from today below is from FutureSource

I do not see any evidence of any delay - infact, the big drop apparently started just BEFORE 10:30, which seems a bit atypical to me from memory.

Personally, I learnt (while practicing before playing the market for real) to steer clear of placing any orders just before or for a while after the report comes out. Them be craaaazy times.

Click on the chart for full size:

Jaymax (cornucomer-doomopian)

Regarding the big drop before 10:30, sometimes they have released it a minute or two before 10:30. And I've always suspected some leakage the morning of - notice the weakness starting around 9am.

That chart certainly implies some leakage of the report. The guy who issues the numbers posts on my blog. Maybe I should ask how many people know about these numbers, and if they have checks to make sure nobody is selling the information.

Good idea. Since two organizations release numbers, there seems to be a lot of parties involved. Several weeks ago, the API showed a big draw and the EIA showed a big build and there was a pre-release rally that day.

Good luck Robert. If you think you can step in front of Goldman, Morgan, Phibro, every Oilco Major trading desk + fair trigger traders world wide you may need to re think.

However, you may well be smarter than the sum of that group. Only one way to tell unfortunately. And if you are wrong, the leverage of a futures position can bite you real fast.

The info that there is no regulation against insider trading is correct. If you know something before the market you are free to exploit that knowledge.

Robert could always buy a contract for full value, no leverage.

Prices are back up, what gives?

my opinion and i know most of Oil Drum readers know quite a bit more than me but here it goes anyway:

Oil Thoughts: Oil is now global market, with international supply/demand dynamics continuing to override short-term market pullbacks as as we go forward.

1) the IEA reduces demand report by 500,000 barrels a day to 87.69 million barrels(due to higher prices), however the world still only produces approximately 85 million barrels a day global demand still outpaces supply

2) talk of OPEC increasing production with crude hovering around $90-95 a barrel seems a little far fetched considering this is the same organization that couldn't get its members to hold back production at a whopping $10 per barrel, OPEC is likely already producing as much as they can

3) The subprime mess continues, thus increasing the necessity for further rate cuts to stave of a recession...which will likely further weaken the dollar...which is already at multi-year lows versus world currencies...the dollar will likely remain weak

4) china's torrid growth rate is accelerating and has a long way to go... yet the consume less than 18% of the oil the US does...they need oil to grow global demand will remain strong

expect $100 per barrel to be tested again soon, and look for $120 per barrel and $5.00 per gallon at the pump the new reality for Americans.

Patrick Kerr, President, -----

and the obvious flaw in futures markets. They tend to have a lemming like behaviour on the big moves. Right now the bias is toward higher prices as we head into winter. Supplies are adequate but not sloppy. Severe cold weather, or any political hitch and offers will disappear and prices shoot up.

The reverse is likely come Jan(like last year). If we get a warm Dec, some speculative length will get tired/scared sell off sharply.

This analysis seems more grounded to me in macroeconics than the fluff of IEA and Aramco statements which may or may not be taken seriously by major players.

I think that Robert risks losing his shirt on playing short-term information bets.

Being a small investor and trying to win on the short term plays is very tough. Good luck.

Safer is the bet that you are more sure will be true for the week or the month or the year.

And, of course, it's all a gamble.

If Kerr is right, then the best bet
may be the sectors that gain when crude goes up.

Being a small investor and trying to win on the short term plays is very tough. Good luck.

Safer is the bet that you are more sure will be true for the week or the month or the year.

Which is exactly the way I have invested for many years, with great success. I invest based on long-term fundamentals. I just thought it was curious that there appeared to be a delayed reaction to the news, and wanted to know why. That's not the first time I have noticed it, so I wanted to find out if anyone knew why. It looks like it is simply a mirage, as I suggested could be the case in my initial post.

However, there are truly times that I have had advance knowledge of situations as I mentioned - situations that will almost surely move the market. But trading on that in the commodities market would get me away from the strategy that has worked well for me, so I am unlikely to change course.

The initial price move was a trading artifact, not a real indication of buying and selling pressure.

Robert regarding the post above: "My situation is a bit more complicated. Two times in the past couple of weeks, I could have made a lot of money. I heard about the evacuation in the North Sea a good 24 hours before it hit the news. I felt like there was a 90% chance oil would pop up, and it did. But I can't trade on that information, as I would guess that would be classified as inside information." This is another example of a difference in commodities and securities. There is no insider trading in commodities...your reader was allowed to trade on that info if he liked and based on what he is saying he would have made out very, very well, information like that is perfectly legal to trade on, again on the flip side there is no guarantee that the market will respond the way you think---sometimes the market goes the other way for whatever reason...i'm personally surprised that more oil drum readers do not utilize their knowledge and trade futures i think it may be of all the past horror stories on futures... the biz has changed a lot we're one of themost heavily regulated and watch industries in the country..and to me futures or futures options are the best direct way to trade/invest the peak oil crisis..i realize there is a lot more to the peak oil issue than making money, nonetheless there also happen to be plenty of opportunites to use peak oil knowledge and information to make a great deal of money----sorry if it sounds like a sales pitch---its not meant to---again i welcome any questions etc. Patrick Kerr, President of OilGasFutures.Com

Patrick Kerr

I've put my name out on this blog with the hope of picking up invrstors, too. Doing it once every once in a while I see as OK, but doing it every post whle posting several times in a day is spam, IMHO.
Bob Ebersole

That the price of oil is determined by some US inventory levels and not global production shows what a joke the "market" is. It is composed of a handful of big time speculators living in lala land of global oil shortage denial. By underpricing the oil this "market" will only make the shortage situation worse. According to "marke wisdom" and assorted bleatings from Saudi officials we weren't supposed to be in the current price regime at all. Unless there is a gush of new supply next year, I would not expect these frivolous pricing signals to dominate next year.

TOD - Where the elite meet to share investment strategy.

Because thats about all we have left anyway.

Master distiller of Sarconol

Admittedly, I tend to have a nasty suspicious mind, but I can't help but have a severe distrust of these published figures. Too many times the lay of the land is looking grim, a pleasant surprise is announced from consolidating entity, there is a flurry of response, and then the grind resumes.

Regrettably, I haven't been keeping a log of these events but perhaps I shall start.

- Shunyata

I too have a suspicious mind and the jump certainly caused me to raise an eyebrow. On the other hand, oil prices pretty much ignored the report. This morning they've moved up past where they were beforehand.

Robert, here's an idea: how about a small test account? I fund it you run it, it seems like your market knowledge would make it worth your time, you could even post the results here ....oilman bob what type of oil investments are you involved with? My personal feeling is prices are going higher overall. As always there will be pullbacks, even big pullbacks along the way. anyway, that's it for now---pk

<tongue location=cheek>You don't want to be giving that man your money, he's about to lose a $1000 bet on the price of oil!</tongue> :-)

$95.25 and climbing...

Jaymax (cornucomer-doomopian)

Patrick and Robert: As a fulltime daytrader I find that it can be really hard to predict what the market will do based on the oil release -- or most economic numbers. The best report day trades (that is, the ones with highest probability of success) often occur, believe it or not, after the markets have made their initial move. (Of course, some report days give no real trade opportunities anyway.) Most professional traders will tell you that predicting what the market will do based on an economic release is very difficult. If Robert is good at longterm investing I suspect he would do well to keep at it. Trading is a whole different discipline and requires an investment of time and money before one typically reaches the point of consistent profitability. Of course if you happen to be a natural, have at it!

To the previous commenter who mentioned contract expiration day: I can't imagine that the contract expiration day means much. Unless you are an industry player who can take physical delivery of a commodity, you will do well to roll over into the new contract on "roll over day," when the next contract becomes the "front month contract," which is most heavily traded. Small speculators start to get into real trouble if they hold past "first notice day," after which penalties may apply and certainly it becomes harder to get out of the contract you are in as there are fewer traders to take the other side of your trade.