This week was a very dynamic week for me as I made a bid every day (something which I have not done in the past 2 weeks).

During our expert group meeting, we didn’t really have much to discuss about because the production news for this week seemed pretty dry. We mainly based our conclusions off the numbers of the USDA report where we compared last week’s yield to this week’s. We expected:
– Corn prices to go down because of higher yield
– Wheat prices to go down because harvest in the Black Sea regions reported high supply
– Soybean prices were neutral because harvest season just began, so we weren’t sure what would happen.

Sept. 26^th
Did not bid, kept my contracts from last week.
Short/corn/1
Short/wheat/1
Long/soybean/1

So this week I decided to go all out and bid in each commodity with more contracts. Let’s see what happened…

Sept 27^th
For starters, looking at the trend and talking with classmates, I believed that the prices will be up for the beginning of the week because traders on the CBOT were active and everybody was trading. So I bid,

Long/wheat/3 at 652.4 => profit $370
Long/corn/3 at 652  => profit -$180
Soybean stayed the same => profit $170
Total profit for the day = $360
Margin after clearing = 27,670 + 360 = $28,030

Sept 28^th
Honestly, I didn’t have much of a strategy for the this day. I just thought, since the prices went up in the past few days, I had a feeling that prices will drop after a big spike. That seems to be the cycle that I have observed over the last 2 weeks. And it matched with what we learn in FRE 502/501, that prices fluctuates in cycles, going up down up down…..

So I bid,
Short/wheat/5 at 654  => profit $1890
Short/corn/5 at 649.1  =>  profit $2465
Short/soybean/5 at 1260  => $7170
Total profit for the day = $11,525
Margin after clearing = 28,030 + 11,525 = $39,555

I was extremely ecstatic because my net position had never been above 30k. I made a lot of money from the significant decrease in soybean. I didn’t have much rational reasoning for this, but soybeans had always seemed to be the commodity that dropped the most during bearish market.  I think  because harvest is just starting, so there is a higher supply of soybean in the market.

Sept 29^th
I looked at the market after it closed to see how the prices were doing. Surprisingly, the prices of all 3 commodities were going up! I was really scared because I had so many contracts in short. That day was also a very busy day for me, so I did not put much thought into what to do, so I tried to offset whatever I had.

So I bid,
Long/wheat/5 at 629.2 => profit $3910
Long/corn/5 at 625  => profit $1580
Long/soybean/1 at 1222  => profit -$1720
Total profit for the day= $3770
Margin after clearing = 39,555 + 3770 = $43,325

Thankfully, because i offset my short contracts,I made some money this day.

Sept 30^th
For the last day, I thought I was pretty set and didn’t have to do anything. However, when I checked the prices after market closing, the prices completely changed again!! I was so frustrated because I just DIDN’T UNDERSTAND WHY?!?!?!? And I wasn’t able to find much news about it, after such a dynamic week of bidding, I decided to just offset what I had in corn and soybean because those seemed to have fluctuated the most, and I kept my wheat contracts.

So I bid,
Didn’t do anything to wheat  => profit -$4500
Short/corn/2 at 634  => profit $160
Long/soybean/5 at 1233  => profit -$750
Profit of the day = -$5090
Margin after clearing = 45,325 + (-5090) = $38,235

Sigh…i should’ve offset those wheat contracts too…lol..”if only..”
I LOST 5k in wheat! It was crazy! I woke up at around noon, and I was casually checking the prices on my phone, and BAM! Prices were all in red, dropping at an average of 50cents!
I thought I was looking at the wrong site!! And right beside the price table was the news about US having an extra stock of corn!! So that was the reason! If only we had known about that earlier….
But one thing I did not understand was why would the prices of soybean and wheat also drop due to the extra corn stock?? Was it another issue to do with the EU??

—————————————

I will be reading up market closing reports to gain some insight into why the prices were like this. I am glad I made 10k earlier in the week, so I was able to still have a total gain after losing 5k on Friday.

So this week, I made a total profit of $9785! Which is a lot compared to the 2k I made in the last weeks each.

I still feel that my strategy is quite instinct-based, and I depend a lot on discussing with classmates. Hopefully in the coming weeks, I can decide on what to bid based on some real research and analysis.

What i learned this week…
After this dynamic week of bidding, i think bidding high number of contracts is actually less risky than just going 1 contract each day. It’s less risky, and you have a higher chance of making more money. I think it was a good idea that i bid 5 contracts each when i was quite sure of what the market was going to happen, that way i could make a bigger amount of money. Even later in the week, when the prices are less predictable, I am able to “afford” losing more. Not that anyone would want to lose, but at least my margin won’t be lower than what i started off.
|I know i mentioned that i would focus on more the long-term, and won’t change my bids due to the daily changes. And this week, i did the exact opposite, but hey~it didn’t turn out bad. hahah I think i’m just too risk-averse to wait and see…if i see something sketchy going on, i have to change it right away.

Anyway, I would like to see my margin pass the 40k mark next week!

Thanks for reading, sorry, don’t have anything too insightful~ ^^”

Caroline

Dear Blog,

This week was a really challenging week for me to predict the price trend. Even having read the expert blogs and done my own research, I had a hard time understanding certain articles, and some were very conflicting. I thought I understood it better from first week, but the more I read the more confused I get!

For corn, I read the article about China releasing an “unspecified amount” of corn from stock reserves to meet the domestic demand, thus they won’t need to demand corn from U.S. This piece of article really ‘stood out’ to me, so I believed that prices of U.S corn was going to fall for sure. However, looking at the prices for Monday and Tuesday, prices were actually rising and that really confused me, I really didn’t know what to bid on. In the end, I went with my instincts still believing that prices would fall, so I bid 1 short contract for corn at 693. I even had a hard time deciding on a bidding price because the range window was quite small. Fortunately, my predictions, or more like my instincts, were correct. Corn price did fall!

On the 21^st, Demand group confidently said that all 3 commodities’ prices were going to fall, so I decided to be brave this week and bid a total of 2 short contracts for corn, 2 short contracts for wheat, and 3 short contracts for soybean (1 to offset the long contract).

In shock, the prices of all 3 commodities on the 22^nd fell like CRAZY. Each fell on average about 30-40cents each, so obviously, my bids did not enter the market at all, which was very unfortunate, or I would’ve made a lot profit. On the other hand, I lost money from the long contract on soybean (thankfully not a lot because I only had 1 contract), but my gains from the 2 short contracts of corn and wheat covered the loss. However, the point is I had no idea, even now, why the prices fell so much in that one day. Everyone was discussing this problem, but none of us could really answer it. I’m thinking it was probably due to the price decrease that everyone is offsetting contracts, thus encouraging the fall. Normally, I would immediately offset my long contract, but I am predicting that after such a great fall, prices will be rising soon.

 What I learned this week:

 Phew! What a dynamic week, I felt that I was pretty active in bidding, but because none of my new bids actually entered the market, I only had 3 contracts by the end of the week haha.

Although our bidding is quite short-term because we are focusing our trading by week, I was too focused on the immediate short-run as in what happened on that day. For example, if soybean prices are falling that day, I would immediately bid short contracts, but if the prices end up rising the next day, I would bid long contracts to offset. My decisions were too dependent on what happened on the day of, in which I neglected to think about what would happen in the next couple days. Just like this week, if I had been more analytical and not offset my short soybean contracts, I wouldn’t have lost money, but I did because I was too focused on daily prices. So having a long run perspective is what I will be learning to do for next week.

Another concept I learned this week was the process of calculating offset contract profits. I was confused for the whole week because my calculations did not match the balance sheet of Javier’s.

Lastly, this may sound really dumb, but I have only figured out that we are supposed to look at the U.S prices specifically. At first, I was not specifically focusing on any country’s prices because I’ve always thought that we were looking at prices in the world market, so I did not think much of the effect of lower demand for U.S commodity. But now that I know, I think my strategies will change slightly. Also, I’ve been focusing too much on looking at demand/supply that I’ve been neglecting the technical analysis group’s opinions. I would like to start understanding this analysis because I believe it is a valuable resource in predicting price trend, especially the concept of Moving Average.

Profit Calculation:

Sept 19^th
Short/Soybean/1: 1*(1358.6 – 1336)*50 = 970
Margin after clearing: 26,780 + 970 = 27,750

Sept 20^th
Short/Soybean/1: 1*(1336 – 1338)*50 = -100
New bid for Short/Corn/1: 1*(693 – 690.2)*50 = 140
Margin after clearing: 27,750 + 140 – 100 = 27,790

Sept 21^st
Short/Corn/1: 1*(690.2 – 685.6)*50 = 230
New bid for Short/Wheat/1: 1*(680 – 666.6)*50 = 670
New bid for Long/Soybean/2: [2*(1337 – 1338)*50] – [1*(1338 – 1320.4)*50] = -780
Margin after clearing: 27,790 + 230 + 670 – 780 = 27,910

Sept 22^nd
Short/Corn/1: 1*(685.6 – 650)*50 = 1780
Short/Wheat/1: 1*(666.6 – 633.6)*50 = 1650
Long/Soybean/1: 1*(1283 – 1320.4)*50 = -1870
Margin after clearing: 27,910 +1780 + 1650 – 1870 = 29,470

Sept 23^rd
Short/Corn/1: 1*(650 – 638.4)*50 = 580
Short/Wheat/1: 1*(633.6 – 640.6)*50 = -350
Long/Soybean/1: 1*(1258 – 1283)*50 = -1250
Margin after clearing: 29,470 + 580 – 350 – 1250 = 28,450

Total profit week 2 = 1670
Margin Balance as of week 2 = 28,450

Pretty glad that I still made profit this week, hopefully I can make more next week!

Caroline

Because this was the first week, i had a difficult time reading and analyzing each expert blogs, and it was hard to determine the magnitude of each report. As I am in the productions and crop reports group, my bidding strategy was mainly based on the information I researched on and from the information from the demand group. In the end, the fundamental concept of market price determination is from demand/supply.

I first looked at the information from the USDA crop report on corn and it was forecasted that the supply of corn would decrease in the biggest production country, US Midwest. Immediately, i assumed that there would be a shortage in corn supply, so the prices would go up. Most importantly, the stock-to-use ratio was very low, 5.3%, which was associated with price increase. At first, i was certain that i was going to go long for corn expecting a big rise in prices, but i was looking at the prices over the past few days and i realized that there was a lot of fluctuation in the price which lead to a very inconsistent price trend. I am risk-averse so i preferred not to bid on corn until there was a steadier price trend.

As for Wheat and Soybean, I could say that i was quite sure that the prices of both commodities were going to fall as the economy predicted that there would be large supply in the market. Still, i chose to bid on only one commodity just to be safe, and in my perspective, soybean had a steadier price decline trend than wheat.

So I bid 1 short contract on soybeans. I knew to enter the market, i needed to bid within the Low-High range of the next day, and for a short contract, i should bid just under the high to maximize profit. I looked at the High’s of the past few days and calculated about how much it dropped each day, then i predicted the high of the next day and entered a bid price a couple cents under it.

Aside from reading news and blogs, i realized it was very important to share and discuss with my classmates. One person was more familiar with corn, one person was more familiar with wheat etc, so when we talked to each other, we were able to feed each other info and just fill in the holes in our knowledge.Of course, we confused each other even more at times, but I felt that i learned more from talking to them than from reading on the websites. Great thing was, everyone was not greedy with maximizing own profits and shared their thoughts! haha

Overall, it was a very challenging week as it was my first time learning how to trade in a futures market, and it took me about 1 whole day just to understand how to bid the prices to enter the market. But honestly, there are still many confusions about this game, so hopefully I will learn as I play and become a pro! haha =)

Let’s make some moola! $$

Here is my profit summary of the week.
I only bid on soybean. 1 short contract for sept.14 (at 1391) and another 1 short contract for sept.16 (at 1370).
BUT, my 2nd short soybean didn’t enter the market because my bid price was too high
Closing prices:
sept. 14 – 1382-6
sept.15 – 1358-6
sept.16 – 1355-4
Profit:
sept.14: 1x(1391-1382.6)x50 = 420
margin after clearing = 25,000+420 = 25,420

sept.15: (1382.6-1358.6)x50 = 1200
margin after clearing = 25,420 + 1200 = 26,420

sept.16: contract 1 (1358.6-1355.4)x50 = 160
margin after clearing = 26,420 + 160 = 26,580

(Total profit for the week = 420+1200+160 = 1780)

Caroline Chiu

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