Recap of last week’s holdings
I was holding short contracts for all 3 commodities last week because prices fell quite dramatically. (Ex. I was holding 9 short contracts for wheat and 11 short contracts for soybeans!) A few of my colleagues have cautioned me against this as it is challenging to accurately predict the market’s movement, thus probably impractical to hold too many short contracts in the long run–> subjecting myself to too many risks should the market turn around.
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As Bernanke announced that no additional dollar printing will occur now in the US, there will then be a limited supply leading to appreciation and lowering prices of commodities. The US dollar has strengthened to its highest value in 11 months. However, this could possilby create psychological barriers amongst traders in US dollar investments as it has been depreciating steadily this year. I predicted that the prices of commodities would rebound a bit since they have fallen in prices over the last week, and traders are taking more caution towards the US dollar appreciating.
Although corn production has increased to 16 tonnes in Ukraine, it was originally estimated to be over 18 tonnes this harvest. News also reported that traders are believeing that the corn market is oversold. From the technical analysis p.o.v, the corn market looks bearish in the short-term, but with news that global demand for corn is expected to be increasing, I predicted that it would lean towards the bullish side on the long-run. All these factors, on top of my intention to offset some of my short contracts, I decided to take a long position on 5 contracts for corn.
Corn -> 5 long contracts @ 645cents (592.4-645)*5*50 = -13150
It is believed that soybeans have been oversold last week due to their rapid fallen prices. Reports state that the production of soybeans in this harvest period has been lower than what they had expected. From the technical analysis view, prices are fluctuating quite a bit with soybeans prices and since I am holding 11 short contracts, I have decided to attempt in offsetting some of my contracts to reduce my risks.Soybeans 5 long contracts @ 1252 (1179-1252) *5*50 = -18250.
Dry weather has been a setback for wheat crops, affecting 80% of winter grain production. Moreover, the lack of humidity on the soil’s surface is increasing the concerns of sowing for farmers. With predictions on our WIKI blog that wheat prices may go up, and with my holdings of 9 short contracts, I decided to try offsetting some by taking a long position with 5 contracts.Wheat 5 long contracts @ 650 (609.2-650)*5*50 = -10200;
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My margin balance is currently 79650. I am holding 2 long contracts for corn, 6 short contracts and 4 short contracts for soybeans and wheat, respectively. As news today reported that the corn prices have fallen again, and the outlook is extremely bearish according to technical analysis, I am planning on offsetting my long contracts for corn next week.
REFERENCES
FRE 501 Twitter
FRE 501 WIKI http://wiki.ubc.ca/Course_talk:FRE501
News Articles:
Effects of Weather on Corn/Wheat http://www.agrimoney.com/news/ukraine-weather-weighs-in-on-side-of-corn-vs-wheat–3638.html
PS. I have also learned that I should not freak out over the number of short contracts that I was holding. I should trust my research and decide on which factors would affect the price movement the most significantly, and then place my bid accordingly. If the price is, say going to decrease, then the more short contracts under my belt, the more profitable I will be. Afterall, taking sensible risks is what bidding is about!
ohhhhhh…….U are really rich……For I nearly to be negative>~<….. I should learn from u, for I can't combine the latest information with the commodity price…really nice blog and good luck for the coming week~
I agree that trying to decide on which factor affects the price movement the most heavily is very challenging! Hope we will be able to see the effects of each factor as we gain more experience throughout this game!
I agree with you Lisa. I think it is better to offset the contracts. You are probably holding too many long contracts for wheat, and that is risky since the price of wheat is fluctuating. Maybe I should take short position on corn next week as well, since you said its still bearish. Thanks for sharing Lisa. Good luck next week!
Actually, I was holding short contracts (9 short wheat contracts). I made a wrong move in predicting that corn prices would increase this week, but it has now turned out otherwise. I am planning to take short position and offset my long contracts for corn this coming week.
HEY teammate! Omg you are SO RICH its crazy! u should treat us to dinner=) hahha anyway, i was celebrating when i made 10k this week, making my margin at 38k now…but now that i look at ur margin…there is really nothing i should be celebrating about hahha
This is actually my first time reading your blog hehe ^^” but i am impressed by your technique! You seem so organized, detail-orientated and analytical. From the way you write your blog, seems like you process your info in a very orderly-fashion, and you think accordingly to the facts u have read step-by-step. I think that is how you make your bidding decisions, and it seems to be working perfect for you!
Just wondering, when the prices fell like crazy on friday, did you make a lot of money or lose?
But anyway, super blog and skillzzz, gonna follow you more now hahaha..
Actually, I lost a lot this week. My previous margin from Week 2 was 1132700. When the prices fell on Friday, I lost because I predicted that the prices of all the commodities would increase again by the end of this week because of the factors that I mentioned. However, it has turned out otherwise.
oh and yes, I would love to treat you guys to an awesome virtual dinner since I’m getting rich from this virtual game 😉
Hi Lisa, you were very good trader last week. But you should be careful about rising prices in which you will lose lots of money and you are not able to offset your short contracts immediately.
Also, your margin balance is 79650 not 495950. Good luck
Thanks Hossein for pointing that out! I have corrected it accordingly!
I agree with you in your PS statement. Just trust the research, and if we do down, we all go down together. I’ve also got a single long contract in soybeans that I plan on offsetting next week. It looks like any psychological barriers investors had for the US dollar were irrelevant and the currency continued to increase far past its 11 month high. Like I said in my blog, it looks like it’s going to get worse (prices lower) before it gets any better.
Thank you for your assurance! I also predict that the prices would continue to stay lower and perhaps even lower for this coming week….getting ready to offset my long and hold even more short contracts!
Hi Lisa, you are so rich! well. it seems wheat will go down this week! Good luck to you:)
Yes, I predict that prices of all 3 commodities would go down this week.
Same to you 🙂