I did two things differently this week. Extending my ‘road ahead’ blog post of last week, I decided to trade in a commodity other than corn – namely soybeans. Secondly, since I was new to soybeans, and also because I had been hearing about the volatility of soybean futures from my classmates, I wanted to watch the market for a few days before I made a prediction and entered into a contract; I entered at the end of the week and for a short period of time.
I went long 2 contracts of Nov 2012 soybeans and short 1 contract of Sept 2013 soybeans. I based this primarily on the price trend for the week. Earlier in the week, I found that all of the soybean contract prices had a downward trajectory and in fact reached a three-month low (1) on Wednesday. This was because of forecasts of higher production in the U.S and pressure from Palm Oil losses (2). However, the short term Nov 2012 and Jan 2013 contracts’ prices started to go up on Thursday as traders came in to capitalize on the low prices. Moreover, the fact that the dollar had weakened also played its part in increasing demand for the commodity. Since I believed that price would continue to rise another day due to higher demand, I chose to go long. I also went short on one Sept 2013 contract, because I found prices consistently lowering throughout the week.
I am puzzled by my ending balance though, so I am not sure how to describe this week’s trade. It turns out that the price of Nov ’12 corn was unchanged at the end of the day, and that of Sept ’13 had dropped 12 cents. Yet, I suffered a loss of $575 for each of my long contracts (for which price was unchanged) and realized no gains for my short contract (for which price went down). My balance is now $36,107.