Before bidding.
This is my first time to actually deal with bidding and before i just sorta heard of it.So i was quite confused about how it worked and i had no idea where to begin with.But after the first confused week,i found out what i should do everyday.It is always excited to realize what you dont understand and try to find answers than have no idea what to do.
9.13 first bidding.
I was kinda getting my feet wet for the first time so not a lot to say,but i followed the strategy combined with my own bidding experience.Since i followed expert blog to know that corn price is quite fluctuate and im a rick-averse,i didnt bid any for corn.After checking the trend in CME,i thought soybean and wheat were going throught a downtrend,so i bidded short for both.But i kinda chose bidding price with a very confused mind..since its nearing midnight and i absorbed sooo many bidding knowledge that day…anyways.When i checked the close price the next day,both of the price were less than high price,so i entered into the market.But the close price the next day was higher than what i bided,so i lost some money…
9,15 second bidding.
I keep track of all the news twittered by my classmates and i check some news from bloomberg and agrimoney n other websites.I think:
Corn:
Due to the bad weather in U.S,corn productions decline,however,corn productions in south America offset the loss and better harvest ups corn supply.Since corn has more profit potential,farmer would like to produce more.Also corn for ethanol decreases because of expected high price,there is more corn supply ,So i go short.
Soybean:
I assume soybean goes through a downtrend from the charts and close price recently also liquidation pushe soybean lower,so i bid short again.Since im kinda sure about this downtrend,i go short 2contracts.
Wheat.
Since the rain cust wheat supply even though does not have much impact on harvest,Still it has some effect.Also wheat is an alternative crop to corn as a feed grain which ups demand.So i bid long for wheat.As im not very sure about it,i just go long 1 contract.
Calculationg.
14 of Sep:
I went short 1 soybean @ 1300 ,which close price was 1382.6
I went short 2 wheat @ 699 which close price was 704.4
Since my bid prices were lower than high price,i entered market.
but my loss for soybean was(1300-1382.6)*!*50= -4130
for wheat was (699-704.4)*2*40= -540
Margin balance was 25000-4130-540=20330
15 of Sep:
I bid nothing.which close price,but my margin still changed.So since i went short,i need to use previous close price-today close price.
which for soybean was:(1382.6-1358.6)*50*1=1200
for wheat was:(704.4-696)*2*50=840
Then margin balance was: 20330+1200+840=22370
16 of Sep:
I went short 1 corn @698, went short 2 soybean @1354, went long -1 wheat @699.
Since it was my first time to enter corn market,and my bid price was bigger than high price,then i entered corn market.and the close price for corn was 692
corn profit=(698-692)*1*50=300
Since for soybean i continued to go short,and close price for 16 was 1355.4 .So i need to use previous close price-today close price.
soybean profit=(1358.6-1355.4)*2*50=320
But for wheat, i went long -1 ,which means i offset -1 contract by bidding long and still remain 1 contract of going short.
HOWEVER I DONT KNOW HOW TO CALCULATE IT.AND I SAW ZHENG’S BLOG,HE GAVE US A WAY TO DO IT BUT I DIDNT UNDERSTAND,I JUST COPIED HIS WAY IN MY COMMENT AND DISSCUSSION PART,HOPE CLASSMATES CAN HELP ME UNDERSTAND IT.THANKS
At last.
I am still not good at filtering information online, which i still feel quite overwhelmed to deal with it and im pretty sure theres a long way for me to go to gradually understand it and have my own sharp opion about bidding(otherwise i wont be a student).The point is not how much money u gain or lose,its the way you think and the wise to bid that matters.Also it is VERY important to share your experience with your classmates,which they can give you their idea about it.Group work is always an added wisedom!Whats more,keeping a short summary for each bid is also a good idea.
I do think bidding is quite interesting and it keeps you thinking how to bid wisely.
Lets enjoy it:)
Fancy
seems like you went through a lot this week for the bidding game. I agree with you that this week, just trying to understand the bidding rules and prices was overwhelming!
I remember after putting in my first bid after a LONG discussion with classmates on the 14th, i decided not to look at the trading game at all the next day hahaha
Anyway, at first i thought like you as well, i immediately assumed corn prices will go u and wheat prices will go down and i was really close to bidding 2 long contracts and 2 short contracts respectively. However, thankfully i talked some our classmates that i eventually changed my mind and just bid short on soybean. So yes, team work and discussing is always the best way to go.
And i guess as the weeks go on, we will have a better idea on how to accurately analyze the information we read. because news are EVERYWHERE, it really depends on our own critical judgement and knowledge in deciding how to weigh the information.
i think we will soon start texting each other news/info and market prices everyday…hhaha..which might makes things even more overwhelming…
thanks for you sharing your thoughts!
Replying to your twitter message. Yes are you are correct.
Think of it this way, your bidding price is ONLY for entering the market in buy a long/short contract. It is only on that day, that you will calculate your profits with your bid price and closing market price. All of the days after that, it is the markets at work, profits will be determined by closing prices only.
Another thing is, for example, you bid a long contract on wheat, but suddenly the prices of wheat are falling, then you would need to bid another price to sell that contract to get out of the market because it is not profitable anymore.
I hope this makes sense to you. =)
Hey Caroline!
Sry for reply late to u since i didnt know i need to approve ur comment – -(i thought comment gonna show up here automatically)anyways.
Thank you for sharing ur insights for this and it does make sense to me.I think its the same for the fact that when u expect price of corn to rise,so u go long,but it declines at last,so u need to go short to offset the position.
But now i get new question..
1.Like first time i went long then i went short next day to offset,so when i calculate my P/L,it should be :
first day:compare bid price with low price to see if enter market,if i do then use close price-bid price.
second day:previous close price-today close price.
Then the third day,if i wanna go short,which means i enter market again,still need to compare bid price with high price to see if i enter successfully,and use bid price-close price to calculate.
2.Also,if went long 2contracts in the first day,and i went short 1contract the second day.can it offset?should i hv the same contracts to offset or as long as i go long and then go short i can offset?
3.If i bid on 13 but no bid on 14..my margin of 14 will change or remain the same?
Thx again for taking time answering my questions.This time ill keep an eye on my gmail reminder to approve ur comment.
Thxxxxx Caroline:)
Fancy
general rules:
Short position:
first day: compare bid price and high, if u enter the market,
profit = (bid price – closing price) * # of bushels
second day = (previous day’s closing price – current day’s closing price)* # of bushels
Long position:
first day: compare bid price and low, if u enter the market
profit: (closing price – bid price)*# of bushels
second day: (current day’s closing price – previous day’s closing price)*# of bushels
1. for second day calculation, since u are still at long position, profit should be (current day closing price – previous day closing price)*# of bushels. Because prices are going up, so today’s closing price will be higher than yesterday’s, then that positive gap is how u make profit.
2. I believe you need to have the same number of contracts to offset. it makes sense, if you’ve bought 2 long contracts, going short on 1 still means u have another long contract left.
3. this question is not very clear. I will have to make assumptions. Based on ur question, I am assuming that the bid u made on the 13th got you into the market. Once you get into the market, you will gain or lose the next day (so the 14th). Even though you did not make a bid on the 14th, your contract from the 13th was in the market. So your margin will change.
IF you bid on 13th and DID NOT get in the market, then you margin will not change at all.
hope this is clear
do you use msn? i think its the best way to communicate. add me hungry_bobby@hotmail.com
talk on msn if you are still unsure~ =)
hey dear smart classmates:
now i hv a question hope u can help me with it!thxxx
Its about offset.
first day
bid -2 at 100
close price :150
second day
didnt bid
close price 200
third day
bid 3 at 175
so now it occurs OFFSET!!!!!
we can devide 3 into 2 part: offset part+remained part
its 2 and 1 here
P/L is offset+remained part
offset:2*(175-150)*50
remained part:1*(175-150)*50
my question y use 175-150 and 175-200
Hope u understand my question…
My bid was too complicated which covered everything but mostly i figured out how to calculate but the offset part is beyond my ability..
Thanks!
Fancy