NEW YORK, Nov 12: Cotton futures settled with strong gains on Friday, reversing earlier losses and a long string of lower closes, when some rollover selling seemed to have run its course and new buying emerged, traders said.

“Today had a good tone to it for the first time this week. It’s strongly suspected that rollovers finished today for one of the major funds. Rolls continued in earnest, but should slow down after today,” said one cotton dealer.

He said the buyside was in the market from merchants, producers and options players who needed to cover positions.

“A number of commercial people decided that 50 cents was low enough for copper and some mill fixations got done on Friday,” he added.

The New York Board of Trade’s key December cotton contract closed with 0.52 cent gains at 50.72 cents a lb. It set a high at 50.94, still lower than previous day’s high. It dropped to a two-month low at 49.95 cents on Thursday.

March cotton rose 0.72 cents to close at 54.27.

The rest closed with strong gains of 0.62 to 0.82 cents.

Deliveries of December futures start on Nov. 22, and switching out of December and into March futures has dominated trade for the week.

Open interest in the December cotton contract fell by 5,723 lots to 42,736 lots as players continued to unwind their long positions on Nov. 10, while interest in second position March went up by a large 4,457 lots to 56,468 lots.

All week long, traders said, locals had been picking up money when a particular fund carried out their rollovers on an outright basis by selling December and buying March, instead of through the spreads.

“The locals knew it and they would load up in the spread every day. Then at the close they would know exactly who would save them. It’s been found money all week,” a dealer said.

“That has been the story of the week, because the locals would press the short side of December all day long and then come out on the close,” he said.

Much of the selling for the previous six sessions came from the heavy rollovers.

“The market was so overwhelmed with the rolls and switches that you couldn’t sort out the fundamental trading that was going on. It’s been lost in the huge volume, because even the smallest of locals has been trading large spread positions because of the found money from this fund,” the dealer said.

An options’ expiration on Friday also helped futures’ prices because some options locals had short positions that needed to buy in the futures market to cover, a trader said.

This week the market will prep for deliveries.

“That will be the focus. There’s speculation that the December contract will have a sponsor and maybe two (take delivery). So, we’ll see what happens,” a trader said.

Flanagan Trading Corp. sees resistance in December cotton at 51.30 and 52.05 cents, with support at 49.80 to 50.50.

Floor dealers estimated final volume at a hefty 29,200 lots, against Thursday’s huge 36,580 lots. Open interest in cotton fell by 982 lots to 111,526 lots as of Nov. 10. Thursday’s cotton calls were 3,403 with puts at 4,203 lots. Friday was estimated a less with 2,450 calls and 1,750 puts.—Reuters