Front running is a term traders use when they pre-empt a market participants move. Often it is done on a case of bluff and double bluff. A trader might imply that one counter-party is buying in large volume and this implication leads to another party taking a position(ideally going long). The trader who made the implication will have developed this position already gaining from the other parties buying. The difficulty with front running is that it has a tendency to make a trader look very good or pretty poor. If a position is put on under the premise of front running and the parties already have that position then someone will be the last to trade or put another way a buyer at the top of the market or a seller at the bottom of the market.

Front runnning has been used recently by traders who believe that the market is going up on the back of retail buyers coming to the market in droves for annual contracts out of October. There is no doubt that many have bought power this way in the past but the reality is that this is happening less and less and many are looking to hedge small and often rather than the more traditional large annual trade. Not surprisingly front running becomes more difficult in these circumstances as players are premepting many trades. Perhaps more worryingl is there appears to be little bearish fundamental news. Oil Gas and carbon are all looking bullish and freight looks to be going up as the americans import more oil, and so irrespective of when one has to buy the retailers know that they do at least have to buy and so traders are getting long often in front months knowing that the market will turn. This is the way to trade a contango market. In means that the curve is likely to rise in the front and then possibly selling will be seen in the backend to allow traders to balance their risk profiles.