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Grains & Beans

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  #1 (permalink)
Market Wizard
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The spread 5*CZ17-2*SX17 currently is priced below -90.

Since 1990 this spread was priced below 0 only once (1997) in January.

Whereas seasonals are slightly downwards, I think this spread has significant upwards potential, at least until early next year.

Acreage will be an important topic soon. According to Hightower, analysts talk about a shift of 2 mio. acres from corn to soybeans.

I expect this spread to be priced above 0 some time in Q1.

Best regards, Myrrdin

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myrrdin View Post
The spread 5*CZ17-2*SX17 currently is priced below -90.

So that's a Corn/Soybean spread.
Why the 5:2 ratio, aren't they both 5000 Bushel contracts?

myrrdin View Post
Acreage will be an important topic soon. According to Hightower, analysts talk about a shift of 2 mio. acres from corn to soybeans.

If you think of the acreage as a ratio do you have any idea where it is versus history.

Thanks for starting the thread/suggesting the trade.
I don't have the ability to trade CBOT ($1020 in data feeds a year) currently but will take a look.

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SMCJB View Post
So that's a Corn/Soybean spread.
Why the 5:2 ratio, aren't they both 5000 Bushel contracts?

If you think of the acreage as a ratio do you have any idea where it is versus history.

Thanks for starting the thread/suggesting the trade.
I don't have the ability to trade CBOT ($1020 in data feeds a year) currently but will take a look.

Yes, both contracts have the same size. But the bushel of soybeans costs more than double the amount of a bushel of corn. I prefer to have the same $-value on each side a spread. Thus, if the price of both commodities rises by 10 % the spread remains constant.

Sorry, I do not have this ratio for earlier years. But the relation between soybean price and corn price is very high for this time of the year, and this supports the idea that area will move from corn to soybeans.

I am a private trader, and, thus, pay much less for CBOT data.

Best regards, Myrrdin

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A spread I like at this time of the year for seasonal reasons is the CZ17-CZ18. According to MRCI this spread should move upwards from end of November until early March.

In my opinion this spread should have special merits, as current price levels seem to suggest a move of acreage from corn to beans.

Furthermore, there is not much weather premium priced in for South America. Weather forecasts currently are excellent, but there is still a long way to go.

I intend to buy the CZ17-CZ18 at around -20.

Best regards, Myrrdin

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Thanks for starting the thread. I have always been curious about trading spreads/grains in general. So far a lot of insight being provided here. Keep up the good work!

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Please be aware that USDA will publish their Baseline forecasts, including a first glance at 2017 US acreage for beans and corn.

This report might confirm 2.5-3.0 mil acre gain in next year’s US soy area, which is discussed widely. But currently bean prices are driven by demand topics, and planting is some months away. Thus, I am not sure that this report will move the C-S spreads substantially.

Best regards, Myrrdin

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Sold the SN-SX at 37.25 with a target of 20 or lower. Stop on a close above the recent highs.

While crude oil price moved upwards strongly soybeans did not follow. To me it looks like beans are coming down again.

Best regards, Myrrdin

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Beans close to the famed 10.30 support for Jan contract Crush numbers out tomorrow eve we shall see by Friday typically 1 more bearish week until mid Dec for beans


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Bought the SMH-BOH yesterday before the close. Stop on a close below the recent los.

This spread was driven down by BO, but now all relevant news should be priced in. BO did not move upwards with CL yesterday - a sign for weekness.

Best regards, Myrrdin

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myrrdin View Post
Sold the SN-SX at 37.25 with a target of 20 or lower. Stop on a close above the recent highs.

While crude oil price moved upwards strongly soybeans did not follow. To me it looks like beans are coming down again.

Best regards, Myrrdin

Just trying to learn. So SN7-SX7 to go to 20 from 37.2 means the spread should narrow
This can happen if
a) N - July falls compared to X - Nov
b) Nov rises compares to July
c) or both

So you hoping SN will move down because of South America crop?
and
SX will move up due to increase in acreage?

thanks in advance

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jokertrader View Post
Just trying to learn. So SN7-SX7 to go to 20 from 37.2 means the spread should narrow
This can happen if
a) N - July falls compared to X - Nov
b) Nov rises compares to July
c) or both

So you hoping SN will move down because of South America crop?
and
SX will move up due to increase in acreage?

thanks in advance

I assume that SN will move down because of large South American crop, demand being directed to South America, and increase of acreage.

SX should move down as well, but not as fast.

Best regards, Myrrdin

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myrrdin View Post
Bought the SMH-BOH yesterday before the close. Stop on a close below the recent los.

This spread was driven down by BO, but now all relevant news should be priced in. BO did not move upwards with CL yesterday - a sign for weekness.

Best regards, Myrrdin

The stop was reached yesterday at close. Bought back the spread.

I am still optimistic that the lows are near, and that there will be a strong move upwards longterm.

Best regards, Myrrdin

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myrrdin View Post
Sold the SN-SX at 37.25 with a target of 20 or lower. Stop on a close above the recent highs.

While crude oil price moved upwards strongly soybeans did not follow. To me it looks like beans are coming down again.

Best regards, Myrrdin

Bought back the SN-SX spread with a small profit.

The price reacted bullish on a report I would consider slightly bearish. In my opinion, the reaction to a report is more important than the report itself.

The spread did not move down as I had expected. In recent years, the final demand almost always was higher than the demand suggested in the December USDA Report. Thus, the January report could show a bullish surprize, and traders could anticipate this surprize, and buy beans.

I still hold the corn minus soybeans spread.

Best regards, Myrrdin

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Curious how the corn minus bean has fared? Jan report prob a mover and we should know about weather as well so what plans to hold or get out - thnx


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jokertrader View Post
Curious how the corn minus bean has fared? Jan report prob a mover and we should know about weather as well so what plans to hold or get out - thnx


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jokertrader View Post
Curious how the corn minus bean has fared? Jan report prob a mover and we should know about weather as well so what plans to hold or get out - thnx


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The spread is profitable, and I intend to hold it for some more time.

My main argument is the assumption that acreage will move from corn (and wheat) to beans in the US. Currently soybeans are expensive compared to corn and wheat.

January USDA Report often is a market mover, but it is hard to predict. I do not expect large moves to the upside for beans, as there are a lot them around, and as big crops often are underestimated by the trade. But is also true that final demand often is underestimated by USDA.

Best regards, Myrrdin

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Yesterdays acreage estimates by Informa, a well known researcher for grains & beans:

US 2017 corn acres near 90,151 mil vs 94,310 mil*(2016) -4,159 mil
US 2017 soybean acres near 88,892 vs 83,648*(2016) +5,244


If realized, this would be strongly bullish for the 5*CZ-2*SX spread. Probably the truth will be in between these estimated values and the values for 2016. The estimates are based on the current value for the spread, but corn might be more expensive in relation to beans when the farmers make their decisions.

Best regards, Myrrdin

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Best site to track actual rainfall vs predictions in South America ?? I think this will be useful to predict movement? Also how much rain is needed for beans? Would be good to know these things to predict how the crop might turn out the best I could find was cpc.noaa.gov


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jokertrader View Post
Best site to track actual rainfall vs predictions in South America ?? I think this will be useful to predict movement? Also how much rain is needed for beans? Would be good to know these things to predict how the crop might turn out the best I could find was cpc.noaa.gov


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Good brokers, experienced in trading of grains and beans, will not only send you the actual weather forecasts, but also interprete them for you. But they are more expensive than other brokers, who do not provide such service.

You might want to check if it does make sense for you to have one (small ?) account for the longterm trades (here fees are not so important) with a broker specialized in the commodities you want to trade, and one with a cheap broker for other trades.

A free source is the weekly newsletter of Water Street Solutions.

Best regards, Myrrdin

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I am still holding the 5*CZ-2*SX spread and the KWH-WH spread. Nothing regarding the fundamentals has changed significantly.

January 12th the next important USDA report on grains and beans will be published. The January report is well known for surprizes.

Best regards, Myrrdin

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myrrdin View Post
I am still holding the 5*CZ-2*SX spread and the KWH-WH spread. Nothing regarding the fundamentals has changed significantly.

January 12th the next important USDA report on grains and beans will be published. The January report is well known for surprizes.

Best regards, Myrrdin

Index fund rebalancing starting Jan 9th will trigger 60-100K new corn longs. Interesting to note that index funds reduced corn longs in Friday’s CFTC report (corn –down 20K contracts). This should help the spread, as no such rebalancing should happen for soybeans.

The spread has reached the zone where it traded from end of June until early November. Thus, I use a close stop, and intend to close or reduce the position before the USDA report on January 12th.

Best regards, Myrrdin

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myrrdin View Post
I am still holding the 5*CZ-2*SX spread and the KWH-WH spread. Nothing regarding the fundamentals has changed significantly.

January 12th the next important USDA report on grains and beans will be published. The January report is well known for surprizes.

Best regards, Myrrdin

Liquidated both CBOT spreads today to avoid the risk of an unfavourable USDA report.

Best regards, Myrrdin

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myrrdin View Post
Liquidated both CBOT spreads today to avoid the risk of an unfavourable USDA report.

Best regards, Myrrdin

The 5*CZ-2*SX is now just below -100. Looks like a good place to re-enter.

The KWH-WH has moved up to above 16. I intend to wait for a set-back to re-enter.

Best regards, Myrrdin

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Today (11 am Chicago Time, 18.00 Central European Time) the USDA report will be published. I do not expect it to be a big market mover for grains & beans. But you never know - these reports can include surprizes ...

Best regards, Myrrdin

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WSJ :- The Next American Farm Bust Is Upon Us

https://www.wsj.com/articles/the-next-american-farm-bust-is-upon-us-1486572488

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myrrdin View Post
The 5*CZ-2*SX is now just below -100. Looks like a good place to re-enter.

The KWH-WH has moved up to above 16. I intend to wait for a set-back to re-enter.

Best regards, Myrrdin

I am still holding a position in the 5*CZ-2*SX spread, and I am still optimistic that it will move above 0 within the next couple of months (currently -53 c).

I re-entered the KW-W, and will liquidate it just below 20.

The arguments regarding these trades posted some time ago are still valid.

Best regards, Myrrdin

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Industry experts, David Hightower and Joe Vaclavik, discuss the upcoming USDA Prospective Plantings Report to be published on 31 March 2017.
https://www.cmegroup.com/education/featured-reports/market-movers-usda-quarterly-report.html

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myrrdin View Post
I am still holding a position in the 5*CZ-2*SX spread, and I am still optimistic that it will move above 0 within the next couple of months (currently -53 c).

I re-entered the KW-W, and will liquidate it just below 20.

The arguments regarding these trades posted some time ago are still valid.

Best regards, Myrrdin

I was stopped out of the KW-W with a loss. There was a lot of rain in the KW area, that helped to improve quality of KW significantly.

I intend to liquidate the 5*CZ-2*SX spread early next week. The spread has moved up nicely, and is now significantly above 0. This trade, which I hold for several months and which currently shows a significant profit, is a good example that it is easier for me to beat the market longterm than shortterm.

I intend to reduce my trading of grains in the coming months, as we enter a weather market.

Best regards, Myrrdin

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since stocks/usage is pretty high the spread has narrowed and could even go negative..i..e July less than Nov.
if there is a weather concern.. this might rise
am i reading this right?

trying to make sense of the past Hightower reports

https://hightowerreport.com/2014/04/jul-nov-soybean-spread-out-of-whack-with-the-fundamentals/

and

https://hightowerreport.com/2013/04/upside-potential-for-julynovember-soybean-spread/

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jokertrader View Post
since stocks/usage is pretty high the spread has narrowed and could even go negative..i..e July less than Nov.
if there is a weather concern.. this might rise
am i reading this right?

trying to make sense of the past Hightower reports

https://hightowerreport.com/2014/04/jul-nov-soybean-spread-out-of-whack-with-the-fundamentals/

and

https://hightowerreport.com/2013/04/upside-potential-for-julynovember-soybean-spread/

Yes, this is the reason why I currently do not trade the SN-SX.

Corn is planted much earlier than beans. If it is not possible to plant corn in some regions, farmers might switch to beans. If weather is perfect for planting corn everywhere, farmers might switch from beans to corn. Similar relations exist between beans and spring wheat and cotton.

Best regards, Myrrdin

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Today at 11.00 am (Chicago Time) or 18.00 (Central European Time) the monthly USDA report regarding grains, beans, and cotton will be published.

I do not expect it to be a longterm market mover, as everybody is looking at the weather forecasts.

Best regards, Myrrdin

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Weather markets are difficult to trade.

I currently hold a careful long position in soybeans:

SX AUG C10 - SX C11, which currently is available for a credit of approx. $ 200. My considerations:

Either the soybeans market stays weak, and the long options expiring on July, 21st, remain below $ 10. At this date, the weather forecasts for the critical time in August are already known. Thus it should be quite safe that the SX C11 Options remain below 11 and expire worthless.

Or the options expiring on July, 21st, close above $ 10. In this case the trade should be profitable at this time, and I can decide to liquidate the whole position or to sell or let expire the long calls only, and keep the short SX C11.

Or there is a strong move upwards soon. In this case the trade should be profitable, and I could liquidate all positions.

Any thoughts are highly welcome.

Best regards, Myrrdin

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In corn I hold a similar position as for beans (see earlier post):

Long CZ , short 2 * CZ SEP C4.50 .

This position is more agressive than the soybeans position.

My considerations are similar than for the soybeans trade.

As my long position is an outright future I have a stop below the March low. In case I am stopped out it is rather safe to assume that the short calls will expire worthless.

I will take profit and liquidate the total Position on a close above 4.50 (in this case 50 % of the options would be uncovered and in the money) or on a clear reversal.

Best regards, Myrrdin

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Interesting post from Twitter:

" Arlan Suderman‏*@ArlanFF101 34 Min.
Vor 34 Minuten


1987 and 1994 were the two years that we know of in warm ENSO cycle like this year. '87 was warm and wet, while '94 cool/wet. Both big ylds. "


Fits to the old saying "Rain makes Grain" .


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For the corn are u expecting to leave the Sep calls and close out the long future on a summer rally ? Or if we get a rally will u close the whole position out? I have Short Aug strangles 405/365 and sept wide strangles 450/360


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jokertrader View Post
For the corn are u expecting to leave the Sep calls and close out the long future on a summer rally ? Or if we get a rally will u close the whole position out? I have Short Aug strangles 405/365 and sept wide strangles 450/360


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It is hard to say if and how far and how fast corn price will move upwards. It all depends on weather.

Critical pollination period for the US is in July.

There are several realistic possibilities:

1. Weather forecasts get worse. In this case, corn price will move upwards, and might go beyond 450. In this case I will liquidate the whole position, as the trade should be profitable at this time, and half of the short calls are uncovered.

2. There is more weather premium built into the corn price, but the weather threat does not materialize. Corn price might move up to somewhere between 4.20 and 4.50. At some point it will be clear that pollination is not in danger, and corn price reverses sharply. In this case I might sell the futures and keep the short calls.

3. If there is more rain in the forecasts prices migh move back soon. In this case I intend to sell the futures and hold the short calls.

4. Something unexpected happens. This is why I use a conservative strategy, and keep lot size at a moderate level. In this case there is a high probability that I liquidate the whole trade.

I consider holding short corn calls currently a risky strategy - you are dependent on the weather. In many years it works out fine, but there are exceptions. The CQ C405 is very close to the money. The only naked calls I currently consider are WU calls. But I should add that I intend to sell them against a long position of MWN outright futures.

Best regards, Myrrdin

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i hope to hold not too long for the 405 calls.. I hope i can survive 2 weeks. then take it off.. otherwise i might have to go long futures if it starts showing movement or sell more put spreads etc

thanks for your thoughts in-depth as always

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Here is an article explaining that traders currently move to Corn instead of Soybean
Inside Futures: Relevant trading-focused information authored by key players in the futures, options and forex industries

CoT data and seasonals supports Corn prices now.
Chart structure suggest that is may break out of the trading range to the upper side.

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jokertrader View Post
i hope to hold not too long for the 405 calls.. I hope i can survive 2 weeks. then take it off.. otherwise i might have to go long futures if it starts showing movement or sell more put spreads etc

In trading I find that 'hope' isn't normally a good thing

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having said that, as a trader

I am willing to and plan to adjust or hedge as required.. and manage as needed

If i dont know how or cannot do it or not willing to do it.. then i should NOT trade weather related seasonals
Myyrdin laid this out in his plan of what he is planning to do

Anyway SMCJB thanks for the comment.. as being realistic and honest.. sometimes can rub people the wrong way.. but best to have that and be ready than just HOPe and pray!!!

Now either I should not be in this trade or be willing to adjust as required (and keep reading agweb and farfutures and listen to Chip Flory daily to see when weather patterns could affect corn)
since i dont have all the weather data that large companies have

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jokertrader View Post
having said that, as a trader

I am willing to and plan to adjust or hedge as required.. and manage as needed

If i dont know how or cannot do it or not willing to do it.. then i should NOT trade weather related seasonals
Myyrdin laid this out in his plan of what he is planning to do

Anyway SMCJB thanks for the comment.. as being realistic and honest.. sometimes can rub people the wrong way.. but best to have that and be ready than just HOPe and pray!!!

Now either I should not be in this trade or be willing to adjust as required (and keep reading agweb and farfutures and listen to Chip Flory daily to see when weather patterns could affect corn)
since i dont have all the weather data that large companies have

The problem regarding weather forecasts is that when we get the information it is already priced in. In my opinion, the only way to trade successfully during a weather market is to set up trades that make money in a large variety of weather developments, as I showed in an earlier post regarding corn and soybeans.

Best regards, Myrrdin

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Closed both my August Corn strangles with about 28% profit still holding the Sept IC with short strikes of 360 and 405


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Aug strangles were 405/365 and 450/360


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myrrdin View Post
Weather markets are difficult to trade.

I currently hold a careful long position in soybeans:

SX AUG C10 - SX C11, which currently is available for a credit of approx. $ 200. My considerations:

Either the soybeans market stays weak, and the long options expiring on July, 21st, remain below $ 10. At this date, the weather forecasts for the critical time in August are already known. Thus it should be quite safe that the SX C11 Options remain below 11 and expire worthless.

Or the options expiring on July, 21st, close above $ 10. In this case the trade should be profitable at this time, and I can decide to liquidate the whole position or to sell or let expire the long calls only, and keep the short SX C11.

Or there is a strong move upwards soon. In this case the trade should be profitable, and I could liquidate all positions.

Any thoughts are highly welcome.

Best regards, Myrrdin

I still hold this position, whereas I was stopped out of the corresponding corn position.

Additionally I hold a long position in Minnepolis Wheat.

Best regards, Myrrdin

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Tomorrow, Friday, at 11 am (Chicago Time) the USDA Report on grains & beans (& cotton) will be released. This report is well known for causing large moves, especially in the row crops.

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From a seasonal point of view, KWZ-WZ looks promising. It should be strong until October.

The spread should get support from strong MW, and from the fact that it rarely goes below 0 at this time of the year. COT data us more bullish for KW than for W.

But remember to place a (mental) stop: In 2007 and 2015 the spread went down below -40.

Best regards, Myrrdin

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myrrdin View Post
Additionally I hold a long position in Minnepolis Wheat.

Looks like that trade worked out well for you - nice job @myrrdin.

I know you look at COT data so I have to ask, are you worried at all about the record spec longs in KE? The wasde report already poured some cold water on the rally and unless there's a deterioration in the crop or some kind of supply disruption those record longs will be looking for an exit, no?

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Bladesmith View Post
Looks like that trade worked out well for you - nice job @myrrdin.

I know you look at COT data so I have to ask, are you worried at all about the record spec longs in KE? The wasde report already poured some cold water on the rally and unless there's a deterioration in the crop or some kind of supply disruption those record longs will be looking for an exit, no?

The MW trade was one of my best in 2017. I liquidated recently, and do not intend to re-enter. The future might move up to 9 $, but could move downwards as well. Options are very thin, and too expensive to buy, and too risky to sell.

The only trade I hold in the grains is a short position of WN8-WH9, sold at -18 some days ago. I intend to risk it to 0, as it has not been trading above for many years. In my opinion, the spread should move down to -50 or below before the expiry of the WN8.

Regarding the KW-W-spread, longs might be looking for an exit in W as well as in KW. But in some cases MW might be replaced by KW, and that could help the spread. I do not think there is a large potential for profit, and intend to exit between 12 and 15. Stop is quite close below the April low.

Best regards, Myrrdin

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Today at 11 am (Chicago Time) / 18.00 (Central European Time) USDA will publish its August report. The report for this month is one that an move prices drastically, as it will show rather final figures for corn. Surprises are possible.

Even if figures are bearish prices could turn around sharply during the next couple of days. I do not hold any short options in grains or beans.

I suggest to keep positions moderate going into this report.

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USDA report was bearish, but the question remains how to trade it. I do not have a strong opinion on the row crops, and, thus, do not intend to trade corn or beans in the near future.

Bought a very small lot of MWU just before the close. Will hold it until a close below 690.

HRS stocks are the lowest in 10 years. Harvested acres were not adjusted lower in this report, but will have to be reduced in September.


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Still hold a large position of WH19-WN18. Intend to sell the position on one further move downwards somewhere between 50 and 55.

Currently I am building a longterm position in CZ8-CZ9. Basis is seasonals, assumption of acreage moving from corn to soybeans in South Americas, and speculation on weather problems in South America some time during the crop cycle.

I would also be interested in the SN8-SX8 spread, but only at a significantly lower prive level.

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Today at 11 am (Chicago Time) / 18.00 (Central European Time) USDA will publish its September report.

I do not expect large price moves upwards as they are discussed elsewhere. But you never know.

The report on Cotton will be interesting.

I suggest to keep positions moderate going into this report.

Best regards, Myrrdin

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myrrdin View Post
Today at 11 am (Chicago Time) / 18.00 (Central European Time) USDA will publish its September report.

I do not expect large price moves upwards as they are discussed elsewhere. But you never know.

The report on Cotton will be interesting.

I suggest to keep positions moderate going into this report.

Best regards, Myrrdin

USDA Report was bearish regarding corn, wheat, beans, and cotton. Cotton trades limit down.

Best regards, Myrrdin

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On 22 sept Fri, soyabean futures ZS and soyameal futures ZM started to move up during Asian time.
It continued till US time.

Was there any indication / data / report prior to that that caused price to move significantly?

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maxinger View Post
On 22 sept Fri, soyabean futures ZS and soyameal futures ZM started to move up during Asian time.
It continued till US time.

Was there any indication / data / report prior to that that caused price to move significantly?

During Asian trading hours volume is very limited. Thus, I would not pay a lot of attention to these price moves. In my opinioin, the most important price in the grains market is the closing price.

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I hold careful long positions in corn and soymeal:

CZ18-CZ19
SMZ17, protected by long put options.

Main reasons for these positions are seasonals and the consideration that La Nina might come back during winter and take care of a dry summer in Brazil.

Additionally I hold a long position in oats. This trade is also supported by seasonal charts until at least end of October.

I still hold the WH19-WN18 spread with a target of above 50.

Any questions or comments are highly welcome.

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myrrdin View Post
I hold careful long positions in corn and soymeal:

CZ18-CZ19
SMZ17, protected by long put options.

Main reasons for these positions are seasonals and the consideration that La Nina might come back during winter and take care of a dry summer in Brazil.

Additionally I hold a long position in oats. This trade is also supported by seasonal charts until at least end of October.

I still hold the WH19-WN18 spread with a target of above 50.

Any questions or comments are highly welcome.

Best regards, Myrrdin

Hi Myrrdin.

Which Exchange are you using? The symbol looks different from those used by CBOT.
So I guess you are using different exchange.

I do outright day trade . So I am curious how you do all those spreading.
Could you please post the seasonal charts too?

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maxinger View Post
Hi Myrrdin.

Which Exchange are you using? The symbol looks different from those used by CBOT.
So I guess you are using different exchange.

I do outright day trade . So I am curious how you do all those spreading.
Could you please post the seasonal charts too?

I trade at CBOT. C is the old symbol for corn that was used in the pit. In the electronic markets ZC was introduced to make a difference. I still prefer the old symbols, which are still widely used in publications.

Sorry - I cannot publish the seasonal charts I use. They are from a paid service (MRCI), and I never publish such information. You could also check seasonalgo for seasonal charts.

Best regards, Myrrdin

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myrrdin View Post
I trade at CBOT. C is the old symbol for corn that was used in the pit. In the electronic markets ZC was introduced to make a difference. I still prefer the old symbols, which are still widely used in publications.

Sorry - I cannot publish the seasonal charts I use. They are from a paid service (MRCI), and I never publish such information. You could also check seasonalgo for seasonal charts.

Best regards, Myrrdin


no problem for not publishing the seasonal charts.

I see that you long the CZ18 - C Z19 spread.
I see that historic low around 3Q16 for this spread was negative 18.
And you probably long around negative 16.
Seems like you got a good price. Am I right?

How long do you expect to hold on to this trade?

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maxinger View Post
no problem for not publishing the seasonal charts.

I see that you long the CZ18 - C Z19 spread.
I see that historic low for this spread was negative 18.
And you probably long around negative 16.
Seems like you got a good price. Am I right?

How long do you expect to hold on to this trade?

I had several buy orders from 12.5 downwards. Was a bit early, but you never know.

I intend to hold this spread longterm through the South American growing season. In case La Nina gets reality and there is severe dryness in Brazil, the spread should move upwards strongly. If not, it should still make some money, according to the seasonals.

Best regards, Myrrdin

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An interesting piece from Kevin Muir on grains in the second half of his post. The overall inflation theme creeping into markets could see the grain market get some bids.

The Macro Tourist | IT'S NOT TOO LATE

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The next USDA Report will be published on October, 12th. The October Report is among the more important reports as the first (more or less) reliable figures for the crop size will be published. I suggest to keep lot sizes small as this report can be a market mover.

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According to reuters, there was damage to Soybean crop due to the hurricanes.

https://www.reuters.com/article/us-china-us-soybeans/chinas-u-s-soybean-imports-face-delays-as-hurricanes-hit-crop-quality-idUSKCN1C90DA

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I am bullish for the next couple of months as long as there is a high probability for La Nina to occur. Soil in Brazil already is dry, and further dryness will cause a relatively small crop. Remember: Brazil supplies a significant share of the world-wide crop.

Best regards, Myrrdin

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I currently hold the following positions in grains & beans:

KWN-WN
Longterm trade.
Seasonality is favourable according to MRCI data.

KWZ-MWZ
Longterm trade.
Last year there were problems regarding Minneapolis Wheat. The spread for the next crop looks severely overvalued. It is important to keep lot size small as MW price can move upwards severely.

Best regards, Myrrdin

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I intend to buy the SN-SX spread.

Seasonals look positive for the next couple of months.
Weather is hard to predict and can influence the crop severely.

Problem: In case weather is fine for the crop the spread will move further to the downside, as it did in 2017.

I will set up this trade via options, eg. buying the SN C1000 and selling the short-dated SX C1000, expiring at the same time as the SN call. This spread is currently sold for 6 c.

In case the spread moves downwards both options should expire worthless. Thus the risk is small.

As always questions and comments are highly welcome.

Best regards, Myrrdin

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  #68 (permalink)
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Looks like this certainly goes up in July but many times the rally starts late April to early June...unless u think due to weather move will be early


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jokertrader View Post
Looks like this certainly goes up in July but many times the rally starts late April to early June...unless u think due to weather move will be early


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This is why I entered this trade via options. The maximum loss is apporx. 6 c at expiry, as long as SX stays below SN or SX stays below 1000.

The probability pf the SX moving upwards and the SN downwards from here seems to be very low.

Best regards, Myrrdin

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Act to George angell, buying Chicago wheat and selling Kansas wheat March 1 and liquidating June 1 is the trade the examples from the book real time commodity spreads are all from 70s and 80s .. @myrrdin looks like u have the opp trade unless I am totally wrong


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jokertrader View Post
Act to George angell, buying Chicago wheat and selling Kansas wheat March 1 and liquidating June 1 is the trade the examples from the book real time commodity spreads are all from 70s and 80s .. @myrrdin looks like u have the opp trade unless I am totally wrong


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Correct, I hold the KWN-WN for fundamental reasons (seasonal, S&D).

It is a general problem to use very old seasonal charts, as the circumstances have changed, as I have shown in the thread "Seasonal Trades".

The seasonal chart for KWN-WN looks positive until middle of March. Weather has not been friendly for Kansas Wheat in recent weeks. The problem with weather is that we cannot see the consequences until spring. Thus, the move upwards could occur in a couple of months.

My target is somewhere between 20 and 35 c.

It is important to keep lot size at a moderate level.

Best regards, Myrrdin

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Market Wizard
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I currently hold the following positions in grains & beans:

KWN-WN
Longterm trade.
Seasonality is favourable according to MRCI data.

KWZ-MWZ
Longterm trade.
Last year there were problems regarding Minneapolis Wheat. The spread for the next crop looks severely overvalued. It is important to keep lot size small as MW price can move upwards severely.

SN C1000 - short-dated SX C1000
Longterm trade. Large portential in case of weather problem in South Americas, limited risk.

5*CZ - 2*SX
Longterm trade. I assume US acres moving from corn to beans. Weather risk of safrina crop (corn after beans) in South America.

Best regards, Myrrdin

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Market Wizard
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myrrdin View Post
I currently hold the following positions in grains & beans:

KWN-WN
Longterm trade.
Seasonality is favourable according to MRCI data.

KWZ-MWZ
Longterm trade.
Last year there were problems regarding Minneapolis Wheat. The spread for the next crop looks severely overvalued. It is important to keep lot size small as MW price can move upwards severely.

SN C1000 - short-dated SX C1000
Longterm trade. Large portential in case of weather problem in South Americas, limited risk.

5*CZ - 2*SX
Longterm trade. I assume US acres moving from corn to beans. Weather risk of safrina crop (corn after beans) in South America.

Best regards, Myrrdin

I currently hold the following positions in grains & beans:

KWN-WN
Longterm trade.
Seasonality is favourable according to MRCI data.

(KWZ)-MWZ
Sold the KWZ, but still hold a short position in the MWZ
Longterm trade.
Last year there were problems regarding Minneapolis Wheat. The spread for the next crop looks severely overvalued. It is important to keep lot size small as MW price can move upwards severely.

(SN C1000 - short-dated SX C1000)
Liquidated the position as no weather problem in South Americas materialized.

5*CZ - 2*SX
Longterm trade. I assume US acres moving from corn to beans. Weather risk of safrina crop (corn after beans) in South America.

SX9-SN9
Brazil crop looks great, and gains here should compensate for losses in Argentine. US acreage will grow compared to estimates in my opinion.

Best regards, Myrrdin

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Seasonal long early March out in June
Thinking of getting in if close to -30

Edit: sorry meant KCN8
Thoughts??

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jokertrader View Post
Seasonal long early March out in June
Thinking of getting in if close to -30

Edit: sorry meant KCN8
Thoughts??

I assume you mean KWN8. KCN8 is coffee.

According to MRCI seasonal data I would enter the KWN-WN from ths long side, and not the WN-KWN. Also dryness in the areas where Kansas Wheat is grown suggests being long KWN and short WN.

I currently hold the KWN-WN, but it is rather late to enter the spread. Depending on the weather, it can move further or not. My target is between 30 and 35 c, but I will liquidate in case of a move back, as the trade is already highly profitable.

Best regards, Myrrdin

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HI myrrdin

I think you mentioned you use no more than 3% of your total account per trade. So my understanding is if you were to sell puts on Soybeans for a certain premium on a 100k account your max on this trade would be 3k. Now is that the 3k the margin you keep or the premium made. I hope I am clear on this point.

THANK
Babak

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rajab View Post
HI myrrdin

I think you mentioned you use no more than 3% of your total account per trade. So my understanding is if you were to sell puts on Soybeans for a certain premium on a 100k account your max on this trade would be 3k. Now is that the 3k the margin you keep or the premium made. I hope I am clear on this point.

THANK
Babak

Correct, I prfer to risk 1 - 3 % of the account value per trade.

The size of the trade depends on the stop I place. When I liquidate the trade at double the price I had received as a premium, I would sell a maximum of 3k per 100 k account value. In case I decide to have a closer or wider stop, the maximum premium is different.

Thus, 3k is the premium, and not the margin.

These figures are approximate figures as I usually liquidate trades only end of day.

Best regards, Myrrdin

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myrrdin View Post
I currently hold the following positions in grains & beans:

...

5*CZ - 2*SX
Longterm trade. I assume US acres moving from corn to beans. Weather risk of safrina crop (corn after beans) in South America.

...

Best regards, Myrrdin

Prospective planting Intentions Report will be published end of March.

Spring insurance guarantee prices were set for corn at $3.96 (2017: 3.96) and for sysbeans at 10.16 (2017: 10.19). Prices for 2017 and 2018 are approximately the same. Relation of actual CZ to SX prices is approximately the same in 2017 and 2018.

Last year the relation of CZ to SX moved up strongly until early June. The same could happen this year, if

safrina crop for corn is late, which seems quite possible,
acreage for soybeans rises compared to corn in the US, and
damage for S in Argentina is more or less priced.

Best regards, Myrrdin

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Market Wizard
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My favorite positions in the grains & beans currently are:

Short CZ P4 (short-dated contract, expiring in June)
Supply & Demand (S&P) bearish according to recent USDA Report

Short KWN P5
KWN-WN
Dryness; larger wheat acreage according to USDA Report mainly for Minneapolis Wheat

CZ-SX
Acreage might move from corn and Minneapolis Wheat to beans; uncertainty regaring safrina corn; very bullish USDA Report

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Market Wizard
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My positions in the grains & beans currently are:

Short CZ P4, P4.1 (short-dated contract, expiring in June)
Supply & Demand (S&P) bearish according to recent USDA Report

KWN-WN
Dryness

5*CZ-2*SX
Acreage might move from corn and Minneapolis Wheat to beans; uncertainty regaring safrina corn

SMN-SMZ
Shortage of Meal from Argentina. This positions also serves as a hedge for the short beans position in the CZ-SX spread.

Short WZ C7. This position also serves as a partial hedge for the long corn positions.

Best regards, Myrrdin

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Market Wizard
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Tomorrow, Thursday, at 11 am (Chicago Time) / 18.00 (Central European Time) USDA will publish its May report.

This report can be a game changer, as new crop gets more and more important.

I suggest to keep positions moderate going into this report.

Best regards, Myrrdin

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myrrdin View Post
My positions in the grains & beans currently are:

Short CZ P4, P4.1 (short-dated contract, expiring in June)
Supply & Demand (S&P) bearish according to recent USDA Report

KWN-WN
Dryness

5*CZ-2*SX
Acreage might move from corn and Minneapolis Wheat to beans; uncertainty regaring safrina corn

SMN-SMZ
Shortage of Meal from Argentina. This positions also serves as a hedge for the short beans position in the CZ-SX spread.

Short WZ C7. This position also serves as a partial hedge for the long corn positions.

Best regards, Myrrdin

I liquidated the 5*CZ-2*SX position. The USDA report was bullish Soybeans. In addition there is some risk that China and Mr. Trump will find an agreement within the next couple of months. In this case, exports to China will grow significantly, and Soybeans price will move upwards quickly.

Instead I bought the CZ-WZ spread, as the USDA report was bullish Corn and bearish Chicago Wheat.

I also added some short WU C5.40, as I think the highs for the Chicago Wheat price are in.

Best regards, Myrrdin

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Market Wizard
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USDA Report in about one hour. The June report often is boring, but also can be a market maker. Be careful.

Best regards, Myrrdin

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myrrdin View Post

Instead I bought the CZ-WZ spread, as the USDA report was bullish Corn and bearish Chicago Wheat.

Hi @myrrdin, how did this spread work out for you? Are you still in this? I'm looking at seasonalgo at this very spread and it is looking like a mild/moderate buy purely from a technical point of view. The trade wars with China and their resulting storm will have an affect of course, but looking at last Friday, it seems as if the grains may be levelling out, and even rising a little.

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zxcv64 View Post
Hi @myrrdin, how did this spread work out for you? Are you still in this? I'm looking at seasonalgo at this very spread and it is looking like a mild/moderate buy purely from a technical point of view. The trade wars with China and their resulting storm will have an affect of course, but looking at last Friday, it seems as if the grains may be levelling out, and even rising a little.

I liquidated this spread some weeks ago without significant profit or loss.

I was wrong in recent months assuming a significant rise of the corn price. Reasons were:

Safrina crop received unexpected rain just in time,
there is no weather premium built into corn price before the pollination in the US although a less than perfect crop would yield significant problems for supply & demand,
corn price suffered under the trade war, although there is almost no corn exported to China.

In sum, the corn trades still showed a nice profit, the profits for the CZ-SX spreads and the short CZ puts significantly offsetting the loss from the CN9-CZ9 spread. All corn trades are closed.

I do not intend to trade corn as long as the results for pollination are unclear.

The only trade I currently hold in the grains is a long position in Oats for seasonal reasons. But it does not seem to work this year, and I intend to close it soon with a small profit.

Best regards, Myrrdin

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Market Wizard
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I currently hold the following positions in the Grains and Beans:

WNZ8 and WNV8 C6 - WN9.

This year, there are weather problems in most of the wheat growing countries with the exception of the US. Next year, some farmers might grow wheat instead of soybeans and corn. The spread looks extremely cheap.

SU-SX
Short term trade for seasonal reasons.

Best regards, Myrrdin

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Market Wizard
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USDA Report in about 20 minutes. The August report is known for being the potential cause of large price movements. Be careful.

Best regards, Myrrdin

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myrrdin View Post
USDA Report in about 20 minutes. The August report is known for being the potential cause of large price movements. Be careful.

Best regards, Myrrdin

Yep, the report has had some impact with the grains falling. This is positive for me overall - I have some wheat short call spreads open and they've just gone into profit after the report. I also have some corn and wheat calendar spreads which are showing a good profit now too. On the negative side, I have some ZS short put spreads too, which are well underwater.

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Market Wizard
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zxcv64 View Post
Yep, the report has had some impact with the grains falling. This is positive for me overall - I have some wheat short call spreads open and they've just gone into profit after the report. I also have some corn and wheat calendar spreads which are showing a good profit now too. On the negative side, I have some ZS short put spreads too, which are well underwater.

I have to study the reports in detail before having an opinion.

But I will not have an opinion on S&D for the soybean complex before the issue between Mr. Trump and China is over. Thus, I currently avoid trading this commoditiy.

Best regards, Myrrdin

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Market Wizard
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I was asked about my opinion on soybeans in the softs thread.

Yesterdays USDA report was bearish soybeans. But my recent argument (see post below) is still valid: In case Mr. Trump and the Chinese find a solution of their problems the soybean price will move up immediately.

Thus I do not trade soybeans at the time being. There are better trades around.

Best regards, Myrrdin

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Market Wizard
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I currently hold the following positions in grains & beans:

Long CK9-CZ9
Short CH9 P3.7

The USDA report on corn yesterday was bearish, but sales look strong for the foreseeable future.

In Brazil and Argentina they will replace some corn acres and plant soybeans, as the price for soybeans there is very lucrative.this will suppport the May contract.

Seasonals and COT data are in favor of these trades.

Depending on weather in South America, the price of corn will move up slightly or strongly in my opinion. Thus, I split my position in the futures spread and short options.

Best regards, Myrrdin

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myrrdin View Post
I currently hold the following positions in grains & beans:

Long CK9-CZ9
Short CH9 P3.7

The USDA report on corn yesterday was bearish, but sales look strong for the foreseeable future.

In Brazil and Argentina they will replace some corn acres and plant soybeans, as the price for soybeans there is very lucrative.this will suppport the May contract.

Seasonals and COT data are in favor of these trades.

Depending on weather in South America, the price of corn will move up slightly or strongly in my opinion. Thus, I split my position in the futures spread and short options.

Best regards, Myrrdin

Just checking if your spread is short CZ9 or CZ8?

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Market Wizard
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Kruger View Post
Just checking if your spread is short CZ9 or CZ8?

It is short CZ9, as mentioned above. It reflects my opinion that corn price will rise moderately until March for the reasons described below.

Best regards, Myrrdin

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Market Wizard
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I currently hold the following positions in grains & beans:

Long CK9-CZ9
Short CH9 P3.8

The USDA report of last week was bullish for corn, and sales for corn look strong for the foreseeable future.

In Brazil and Argentina they will replace some corn acres and plant soybeans, as the price for soybeans there is very lucrative. This will suppport the May contract.

Seasonals and COT data are in favor of these trades.

Depending on weather in South America, the price of corn will move up slightly or strongly in my opinion. Thus, I split my position in the futures spread and short options.

Additionally I hold the KWH-WH (seasonal trade), WZ-WN spreads and short WH P4.90 options (bullish USDA report, weather issues in Australia, Argentine, and Russia).

Best regards, Myrrdin

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The idea of this trade came from watching a broker webinar 3 days ago. I would love critique and feedback.

On 31-Oct, I opened a soymeal collar:

Long Future : Mar '19 at 306.9
Long Put (270 strike) : Mar '19 at -1.35 (debit)
Short Call (320 strike) : Mar '19 at 8.5 (credit)

I make the max possible loss to be = diff between future and put strike + price paid for put - credit from short call
= (306.9- 270)*100 + (1.35*100) - (8.5*100)
= $2,983 (includes comms) per contract.

I will base the % return on the max possible loss and not on the margin (which is lower).

Magically, yesterday, the underlying rose 10 points and at one stage was at 318. The combo was making around $800 profit. On opening, my plan was to try and close if the future hits 320, since after that the gains are limited by the short call. However, even after that point, since the delta of the calls is around 0.5 and that of the future is 1, then further rises in the underlying will still be profitable, so I'm holding for now.

So for those more experienced in futures collars, my questions are :

1) Do you sometimes just open the future + put, and wait for a bounce before selling the short call?
2) Is there is a guideline for picking the put/call strikes? (I may pick a zero cost collar next time for example, if I'm more bullish about the underlying)
3) Do you sometimes use closer months for the call expiry, with the view that it will expire worthless and you can
then sell more calls for the following month, and the next etc? Thereby increasing the total credit received.
4) I didn't take into account finer details like volatilities etc - any recommendations?

Would love feedback.

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Market Wizard
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zxcv64 View Post
The idea of this trade came from watching a broker webinar 3 days ago. I would love critique and feedback.

On 31-Oct, I opened a soymeal collar:

Long Future : Mar '19 at 306.9
Long Put (270 strike) : Mar '19 at -1.35 (debit)
Short Call (320 strike) : Mar '19 at 8.5 (credit)

I make the max possible loss to be = diff between future and put strike + price paid for put - credit from short call
= (306.9- 270)*100 + (1.35*100) - (8.5*100)
= $2,983 (includes comms) per contract.

I will base the % return on the max possible loss and not on the margin (which is lower).

Magically, yesterday, the underlying rose 10 points and at one stage was at 318. The combo was making around $800 profit. On opening, my plan was to try and close if the future hits 320, since after that the gains are limited by the short call. However, even after that point, since the delta of the calls is around 0.5 and that of the future is 1, then further rises in the underlying will still be profitable, so I'm holding for now.

So for those more experienced in futures collars, my questions are :

1) Do you sometimes just open the future + put, and wait for a bounce before selling the short call?
2) Is there is a guideline for picking the put/call strikes? (I may pick a zero cost collar next time for example, if I'm more bullish about the underlying)
3) Do you sometimes use closer months for the call expiry, with the view that it will expire worthless and you can
then sell more calls for the following month, and the next etc? Thereby increasing the total credit received.
4) I didn't take into account finer details like volatilities etc - any recommendations?

Would love feedback.

1) No, usually not. I am not good in foreseeing the short-time moves of the price.
2) I usually choose zero cost collars.
3) No, usually the strike price is too close to the current price or the profit of the call is too low.
4) There are a lot of things to take into account regarding fundamentals. But this is an own topic.

Best regards, Myrrdin

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Legendary Market Wizard
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@zxcv64 don't forget that buying both a future and a put is the same as buying a call.
So long future with a collar has the same payoff as a long call spread, which is the same as a short put spread.
Long Fut + Long 270 Put + Short 320 Call ~ Long 270/320 Call Spread ~ Short 270/320 Put Spread.

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Market Wizard
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I bought the KWN-WN end of last week for the following reasons:

The spread has not been at such a low level in February since 1984 (I do not have access to older data).

Delivery for the W contract can be made with KW. Thus, KW should not be much cheaper than W.

Question: I would understand that KW is some cents cheaper than W because of transport cost etc. But 20 c or more ? Can anybody here explain ?

Best regards, Myrrdin

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Market Wizard
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I was asked about my opinion regarding Soyoil in another thread, but answer it here to allow other traders to find it in a couple of weeks.

Honestly, I do not have a strong opinion on Soyoil. I do not hold a position, and I do not intend to enter a position in the next couple of weeks.

Seasonals suggest a move sidewards for the next couple of weeks.

COT data for Soybeans - I do not have charts for Soyoil - are bullish.

Supply & Demand for Soybeans to me looks bearish, but a lot will depend on how much China will buy. But I assume that a lot of buying from China is already priced.

There is no clear picture to suggest either buying or selling.

You intend trading the Soyoil contract because of its low margin. I would suggest to start spread trading as here margins are significantly lower. And you have a larger choice of trades with a very small account.

Currently the only interesting trade in the Soybean Complex to me seems to be the 5*CZ - 2*SX. I think about entering this spread in the near future.

Best regards, Myrrdin

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myrrdin View Post
I was asked about my opinion regarding Soyoil in another thread, but answer it here to allow other traders to find it in a couple of weeks.

Honestly, I do not have a strong opinion on Soyoil. I do not hold a position, and I do not intend to enter a position in the next couple of weeks.

Seasonals suggest a move sidewards for the next couple of weeks.

COT data for Soybeans - I do not have charts for Soyoil - are bullish.

Supply & Demand for Soybeans to me looks bearish, but a lot will depend on how much China will buy. But I assume that a lot of buying from China is already priced.

There is no clear picture to suggest either buying or selling.

You intend trading the Soyoil contract because of its low margin. I would suggest to start spread trading as here margins are significantly lower. And you have a larger choice of trades with a very small account.

Currently the only interesting trade in the Soybean Complex to me seems to be the 5*CZ - 2*SX. I think about entering this spread in the near future.

Best regards, Myrrdin

Thanks @myrrdin

What a great post, I'll need time to read and digest this especially the bit on spreads - not sure what these are?

Sent using the futures.io mobile app

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