What is the first day of the announcement?
The first notification (FND) is the day when buyers' futures contracts can receive delivery notifications. This is their warning that holders of such positions could have to take over the commodity specified in the contract. It is a problem to avoid and not the purpose of trading commodity futures. Futures markets exist only to convert the price risk of commodities from those who do not want it - Hedgers - to those who try to benefit from it - speculators. In order to maintain commodity prices in accordance with actual market prices, most futures contracts require delivery as part of the expiration process. Without the provision of delivery, the price would only be theoretical and the contracts could not fulfill their economic function. A merchant who buys a commodity in the hope that value is increasing and wishes to stay in this "long position" simply sells its position and reconstruction in the next month of the calendar. Those who are forgotten or unhappy to hold their long positions through the FNDDelivery.
delivery is not automatic in the first notice; The rules differ from one exchange to another. After the delivery notice is issued, problems with a long trader may multiply. Could be obliged to publish the full monetary value of the contract immediately. Business liquidity disappears and prices can become extremely volatile because most other traders have left their contracts.
graceful exits after the first announcement are sometimes possible. For example, it may be possible to simply sell a position, but it will stop trading on some markets before the first day. Some exchanges allow the retaunder trader a contract - in fact sell it for a fee far above normal commissions. Details differ again according to the market.
If all others fail, actual delivery is made. It may not be a problem for a merchant who has happened in a store with what trades. For example, the owner of the petrol stationIt may have the ability to transport, store and/or provide 42,000 gallons of unleaded gasoline, but most traders do not.
A simple solution to the danger of the first day of the announcement is to leave the long position of the day - or a week - before FND. Brokers try to prevent their clients from problems such as the first day and possible delivery. However, the final responsibility is on the merchant.