Can’t believe its already week 8 into the program, its been 2 months everyone! Doesn’t time just fly by!! And surprisingly, only 2 weeks left in this trading game~will you miss this game in term 2? Will it be weird not having to check on commodity news everyday? Will it be weird not having to tweet, blog every week?? Hahaha
Anyway, back to what my strategy for bidding was this week…actually, it’s nothing very interesting. I have to admit that I haven’t been super active in bidding, all these projects that we have are draining my energy big time!!
So, let’s see…what did I do this week….mmmm…
Open position from last week: Short/wheat/2
Margin Balance = $42,030
Monday
Actually, to be very honest, I forgot about bidding until the mandatory Tuesday, so that was why I just left my open positions.
Surprisingly, I made the most profit on this day from the big drop in wheat prices.
Profit = $1620
Tuesday
The reason I kept my 2 open wheat positions throughout the week was because there was big news about the Black Sea Region having increased a large amount of supply of wheat. Not only this, specifically, Egypt, one of the world’s largest importers of wheat confirmed to buy a big amount from Ukraine. From a supply and demand perspective, this would definitely compete with US wheat exports, thus lowering US wheat price. Also, wheat news made a couple of headlines throughout the week, indicating that US wheat price had been pressured to a downward trend.
Profit = -$180
Wednesday
Hmmm..should I bid for corn or soybean? That was the question? I sought opinions from other classmates, some told me to go long on corn, but I had a feeling that it wouldn’t be the best decision because corn prices tended to fluctuate a lot, so I have always found it difficult to bid on corn. I decided to go long on soybean because production in the states wasn’t too optimistic, and the technical analysis group stated that the soybean market seemed to be in a bullish territory. I was correct as I made a profit of $220 from soybeans.
Profit = $880
After this day, I did not bid again for the week. As you can see, I made negative in the next 2 days due to my laziness and neglecting.
Thursday
Profit = $30
Friday
Profit = -$400
Margin Balance = $43,980
Profits this week = $1950
I’m pretty satisfied with my balance right now and the profits I made this week as I made -155 profits last week, so it was a big improvement!
Just a little thought: If US wheat demand decreases, wheat prices will decrease as well. Given that corn and wheat are substitutes; would farmers switch to growing more corn instead? However, EU corn exports are competing with US corn exports, giving pressure to US corn price. But what we saw this week what the corn price fluctuated a lot, I’m trying to think through why that was….Anyway, I know this section was pretty useless because I basically said nothing at all..but I went to see Jim today, and these were some things he told me think about now that we’ve learned the foundation of substitution.
Hopefully I will be able to learn more in the last 2 weeks.
Have a nice weekend!
Caroline
If demand for wheat decreases then CBOT wheat prices should fall, but if wheat prices fall feedlots and processors would start to buy more wheat instead of corn for the week. So I think there is a cross-price elasticity that should be significant and Tasha found an article, search her Tweets from last week. Last week I graphed corn minus wheat prices since the game began and found that the spread likes to remain around 17 to 20 cent difference if corn is more expensive than wheat; if wheat is more expensive than corn then the spread likes to be around 15 cents. You can check my last week’s blog for the proofs. For the most this strategy is most useful if corn minus wheat is too narrow (say 5 cents) and if I know both prices will be bullish or bearish with a high probability (you can use the MACD to gain a hint) then I would look back and see whether corn or wheat has gain the most in the last couple days and go long/short on the other commodity because the spread should widen within a day or two.
Caroliiineeeee!
Just a quick thought on your last point.
If Demand for wheat decreases, then Price of wheat decreases. In terms of substitution it means farmers will want to produce more corn. So you’ll expect to have lots of supply in the next period so you expect Corn prices to fall. So people storing now will release corn stocks which leads to a current fall in corn prices…. enabling US to compete against EU exports.
HAHA does that even make senseeee??
<3
heyyyy Caroline!!!! Interesting blog..I just know only 2 more weeks for trade game..but i didnt think we gonna stay away from our twitter blog etc..ohhh~~
wow u made some money this week.i lost a lot from 40000+ to 25000….
so basically like if its 6today.we bid for 7th.but on 7th,we read news about 7th…but it wont help us a lot since we have already bid 7th on 6th!!!(hope i make my point clear>.<) is it right?
btw what Janelle just said if price of corn would decrease in the future…y ppl wanna store now and release them in the future??
Hi Fancy!
Oh I said people who are storing corn now will release the stocks now… so this will lead to corn prices falling now. They dont want to store corn because they expect future prices to decrease haha
hahahha yes now it makes sense to me!
so now price of wheat decrease.more demand for wheat and more wheat land for corn…leads to price of corn decrease(in the future or now?hmmm)and then if its in the future corn price decrease ppl would release corn stock now..so corn price would decrease now..and if its now corn price decrease due to wheat ….maybe not lot effect on stock releasing????
do i think too much?!?!?!?!?!