{"id":20,"date":"2012-09-20T18:12:56","date_gmt":"2012-09-21T01:12:56","guid":{"rendered":"https:\/\/blogs.ubc.ca\/lambla\/?p=20"},"modified":"2012-09-20T18:12:56","modified_gmt":"2012-09-21T01:12:56","slug":"up-in-corn-split-in-wheat","status":"publish","type":"post","link":"https:\/\/blogs.ubc.ca\/lambla\/2012\/09\/20\/up-in-corn-split-in-wheat\/","title":{"rendered":"Up in Corn, Split in Wheat"},"content":{"rendered":"<p>This week I experimented in hedging by going both long and short in the same commodity. I successfully spent a few days making money in a short corn contract, but I wanted to try something more complicated, so I took the advice of Andrew Bordern and &#8220;Sold High and Bought Low.&#8221; I got out of my corn contract and went long in a December wheat contract, with a plan to sell it on Friday. Reuters reported a &#8220;recent surge in wheat prices&#8221; in their September 18 article &#8220;OUTLOOK-India wheat seen stable after fall in global prices,&#8221; <a href=\"http:\/\/in.reuters.com\/article\/2012\/09\/18\/markets-india-wheat-idINL3E8KH59X20120918\">[1]<\/a> so I expected prices to drop soon. Therefore, just in case Reuters was wrong, I decided to see what would happen to a long position for just a few days. By the end of trading on Thursday, I had &#8211; as predicted &#8211; lost just over $112.<\/p>\n<p>My short corn contract, on the other hand, did quite well, as predicted. I was skeptical of judging my trades on the production in one country &#8211; India &#8211; but covered those hesitations with my split position.<\/p>\n<p>This analysis did bring up a question, however &#8211; how quickly does it take for the market to respond to actions in one producing country? How long does it take the Law of One Price and Adam Smith&#8217;s promise of equilibrium to balance out prices for such a commodity?<\/p>\n<p>&#8220;A sharp fall in U.S. wheat prices weighed on grain prices across the globe and its impact was felt in India as it could cut export demand for Indian wheat,&#8221; according to Reuters.\u00a0 \u201cWheat futures in India, the world&#8217;s second-largest producer, are likely to remain stable for the rest of the week, after falling on Monday on global cues.&#8221;<\/p>\n<p>The last two days of my held contracts fall in line with these observations and predictions, however, suggesting perhaps one major producer can effectively predict the market movements.<\/p>\n<p>&nbsp;<\/p>\n<p>[1]\u00a0<a href=\"http:\/\/in.reuters.com\/article\/2012\/09\/18\/markets-india-wheat-idINL3E8KH59X20120918\">http:\/\/in.reuters.com\/article\/2012\/09\/18\/markets-india-wheat-idINL3E8KH59X20120918<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This week I experimented in hedging by going both long and short in the same commodity. I successfully spent a few days making money in a short corn contract, but I wanted to try something more complicated, so I took the advice of Andrew Bordern and &#8220;Sold High and Bought Low.&#8221; I got out of [&hellip;]<\/p>\n","protected":false},"author":8589,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[568639],"tags":[],"class_list":["post-20","post","type-post","status-publish","format-standard","hentry","category-what-went-rightwrong"],"_links":{"self":[{"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/posts\/20","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/users\/8589"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/comments?post=20"}],"version-history":[{"count":1,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/posts\/20\/revisions"}],"predecessor-version":[{"id":21,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/posts\/20\/revisions\/21"}],"wp:attachment":[{"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/media?parent=20"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/categories?post=20"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.ubc.ca\/lambla\/wp-json\/wp\/v2\/tags?post=20"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}