Question

What risk is there for holding onto a futures position in the delivery month? How does a trader minimize this risk?

Answer 1

There is a risk of carrying because of holding onto future positions in the delivery month, because when the trader is holding onto the positions, he is exposed to various kinds of event-related risk and market risk which are happening in those securities for the whole duration of the month because the maturity of those securities would be for a month at least.

The position on a future can be held with simultaneous exposure in options or simultaneous buying of the VIX options, so that the volatility is can be protected to a large extent.

There is always a risk associated that each day the securities going to behave differently due to different market events, and it will mean there is a risk of carrying the security for the entire month, so that traders should be hedging the risk with options, so that it can protect against wild swings and it can also protect against adverse economic events.