I have again lost money in Trade Sim this week when in actuality I would have gained. All the positions that I have been taking should have earned me profits (based on the daily price changes that I observed on the CME website), had they been processed in a timely manner. However, due to the lag on the part of Trade Sim, I have incurred losses instead.
Before the crop report:
Early in the week (on Tuesday), I decided to go short on Soybeans. I, along with a number of my classmates had concluded last week that prices of soybeans were trending downwards because of the larger expected harvests in South America. I therefore decided to keep that strategy and went short two Nov 2012 contracts and short another two November 2013 contracts. I ordered this on Tuesday night, and price in was Wednesday’s opening price $15.37 (Nov 2012) and $13.34 (Nov 2013). Since prices did infact drop 26 and 3 cents for the 2012 and 2013 contracts respectively, I was happy with my trade and decided to liquidate my contracts at the end of the day on Wednesday. However, this transaction was processed the following morning when the release of the crop report had played a significant role in driving the prices up. Therefore, instead of the price out being the last price on Wednesday (i.e. $15.23 and $ 13.31), it was a much higher value ($15.54 and $13.53). Ultimately, this translated into a loss of $876 on each of my 2012 contracts and $951 on each of my 2013 contracts, when it really should have been a gain.
After Crop report
Later in the week, I discussed with my classmates their strategy regarding the crop report. Many of them decided to close all contracts to avoid large losses. However, others saw it an opportunity to recover the losses of previous weeks. I agreed with this opinion. However, instead of waking up at 5 am on Thursday morning to read the report before making a trade, I decided to look up expert opinions on what the USDA was expected to report on Thursday – essentially, expectations of expectations. To my delight, I found many. The consensus there was that corn harvest was certainly going to be low as has been predicted before; USDA was to reinforce this thought. With this in mind, I decided to go long two contracts of Corn. Again, due to the lag in processing, my price in was $7.72 (almost the closing price of Thursday, when it was intended to be the opening). Further, even though I pulled out on Thursday night, the price out was reflective of trading on Friday wherein prices dropped. I lost another $421 per contract in total.
One reply on “Week 4: What Went Right/Wrong”
Hi Ishrat, sorry to hear that you have incurred loss because of the process delay. When you have time to look into this, can you please tell me about the order in details? When you submitted the order at the end of Wednesday, was it before the market close? If it was before the market close, then was it before less than 30 minutes before the close? If you can send me an email with detailed description, it’d helpful. Thanks!