| Date in | Date out | Initial position | Offset Position | Price in | Price out | Loss |
| 2012-09-17 | 2012-09-19 | Long | Short | 671.75 | 664.25 | -376 |
This week, the first week of the trading game, it didn’t go as well as I expected it to be. As this week was the first week, I was scared to start the trade commodity and wasn’t sure how to play well. So, I just used basic knowledge of the trade to understand the game strategy first. I was initially in long position for corn in September, 2013. September is a corn-harvesting period therefore more amounts of corn are available and the price keeps going down during this period. I thought if I bought this crop in September at the cheaper price, I could resell it during winter, a non-harvesting period, at higher price. Then I could get some margin. However, for the trading game, I should do an offset if I wanted to cancel my initial position. I suppose to change my long position for corn in September, 2013 to short position for the same commodity in the same period. There was no way in reselling this September corn in December. As I held a long (buy) future position, I received a debit in my margin account because the settlement price decreased from the previous day and the market price kept declining. My misunderstanding of the definition of “offset” was the reason why I got the loss.
Hi Cindy,
It’s nice to know that you figured out your mistake in time. It will definitely make life easier for you in the coming weeks. As for your strategy in choosing a long (buy) position, I have some reservations and suggestions. While you are correct in pointing out the fact that in the harvest months the price does decrease due to incoming corn stocks, but if the crop production is low (like this year) it incentivizes farmers to store the newly harvested corn. This year the crop has been on the lower end due to drought and your predictions may have been even more accurate had you accounted for this fact, in my opinion. Secondly, you are right that offsetting is necessary to close a contract. However, if you believe strongly in your prediction you also have the option of choosing a long term contract and you may choose to stay in the contract for more than a few days. I think this allows market to settle and gives a better account of your prediction/assumption. I, myself, will also be entering in a long contract soon and would let you know about how I fare on the trading market. Other than that, I glanced over the source of information you have posted and it seems pertinent and easy to navigate. Good job on the blog entry this week! Hopefully, I will be able to read much more about your experiences in the future.
Hi Ahmed!
I really appreciate your comment 🙂
I didn’t realize that low crop production gives farmers an incentive to store the newly harvested corn. As it happens, then the price will go up, right? If i held my long position longer, i might be able to get margin!!! I was so scared that the corn price declined as soon as after i got into the long positoin, so I did offset bit earlier. For this week, I am going to be in long position for wheat bit longer. I hope that I can get better result than last week. Thanks for really good suggestion! Let me know your result for this week 🙂 Have a good night and see you tomorrow in class!
Hope things are clear now. If you need help on understanding how the margin account works, please do not hesitate to contact me. 🙂
Hi,
Thank you so much!
I’d like to ask you a question about margin account. I will send you email as soon as possible.
Have a nice day 🙂