Cotton Futures Surge

Cotton Jun 20, 2012 No Comments

CottonCotton futures surged 6% to the exchange-imposed upper limit Tuesday as investors with bets that prices would fall found themselves victims of a “short squeeze”—thanks largely to recent purchases by China.

A short squeeze occurs when investors who shorted the market, or bet on declining prices, are forced to pay higher prices to exit their wagers in a market where prices are rising rapidly.

Speculators are scrambling to get out of the July contract before Monday, when the exchange-imposed daily trading limit is lifted as the July contract goes to delivery. Analysts expect prices to swing wildly after that.

Front-month ICE cotton for July delivery rose five cents to settle at 87.98 cents a pound Tuesday. The upper trading ceiling was hit even though ICE had raised the trading limit from three cents to five cents for Tuesday’s session.

via Cotton Futures Surge – WSJ.com.

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Rod Sherkin

Rod is a former senior executive, responsible for Purchasing, for both Pillsbury and Ball Packaging back in the 80’s and 90’s. Since then, he has continued to work in the Purchasing field as both a consultant and founder of the website Propurchaser.com.

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