Day: October 28, 2012

Week 6 – What Went Right and .. Wrong

Post author By Roson
Post date October 28, 2012
2 Comments on Week 6 – What Went Right and .. Wrong

Despite some technical difficulties, I had a good start in trading in the past week. I tried to play it safe and lock in small profits on each contract. I was able to do that by longing wheat and offsetting it in the middle of last week.

Last weekend, I expected the futures of wheat would rise at least for Monday due to the news of worries about Ukraine halting wheat export^[1]. I already had a long contract on wheat (W3K) before that, so I placed a short, Price Limit order to offset it. I also placed a Stop Loss order to offset it and minimize the loss in case the otherwise happened.

W3K

Long – Price-in: 889 , Close Price last Friday: 886.75
Short- Price Limit placed over last weekend: 895
Short- Stop Loss placed over last weekend: 880

I expected the price limit order would have been executed on Monday because the price of W3K went above my price limit (895) that day. For some reason, it wasn’t executed and I left my Price Limit and Stop Loss order in. The futures of wheat fell on Tuesday. At the end of Tuesday, there were news about wheat harvest falling in Australia^[2] and declining wheat exports in Turkey^[3] which, I anticipated, should stimulate a upward price on wheat futures on Wednesday. It did and my price limit to short W3K wheat was reached and executed. My price- out was 901.25 against price- in at 889 which resulted a profits of $611.50. I was happy.

I tried to get in the corn market in the latter of last week. I made an erroneous long, price limit order on corn (C2Z) where the number of contracts and price limit were misplaced/swapped into the boxes. I didn’t realized that until the order was processed and couldn’t be cancelled. Since the corn prices was falling at that point, I placed a short market order to offset them. At the end, TradeSim executed 74 longs and 37 shorts to offset the longs, leaving me 37 shorts on C2Z on the end of Friday. Offsetting these 37 short corn contracts are key which I would talk about in my road ahead.

References:

1. Ingwersen, Julie and Nelso, Sam. Reuters. (2012, Oct 19). U.S. soybeans fall, wheat pares gains on macro worries. Retrieved from http://www.grainews.ca/news/u-s-soybeans-fall-wheat-pares-gains-on-macro-worries/1001782004/

2. Sedgman, Phoebe. (2012,Oct 23). Wheat Harvest in Australia Falling 28% to Five-Year Low. Retrieved from http://www.bloomberg.com/news/2012-10-22/wheat-harvest-in-australia-seen-slumping-to-lowest-in-five-years.html

3. Harte, Julia. (2012,Oct 23). Turkey’s Wheat Exports Decline Due To Climate Change, Says Industry Official. Retrieved from http://www.greenprophet.com/2012/10/turkeys-wheat-exports-decline-due-to-climate-change-says-industry-official/

Cool Source of Information Trading Game

Week 6 -Cool Source Of Information

Post author By Roson
Post date October 28, 2012
2 Comments on Week 6 -Cool Source Of Information

This week I came across these two websites as I was trying to look for more authoritative opinions:

US Wheat Associates (http://www.uswheat.org): I think this is a good place to acquire extensive knowledge about wheat as a commodity.
- It provides information like quality, cash prices at export locations, official reports about different classes of wheat (e.g. Hard Red Spring, Soft Red Winter, Durum); Although CBOT is trading Soft Red Winter wheat, it’s important to know about the movement of other classes wheat.
- It provides the schedule of important industrial meetings. We should expect some particular price movements over the days of meetings as a result from the topics and discussions in them.
- It also provides summaries and analysis on important news in their Media Center which give a good up-to-date overview on the current wheat market.
National Corn Growers Association (http://www.ncga.com): This is for corn and all about corn; its usage is similar to the above. Besides, it has a section that covers different topics relevant to the corn market, such as Livestock, Ethanol, Farm Policy, etc.

If you are reading this, I hope this sources would be helpful for you too.

Cheers.

The Road Ahead Trading Game

Week 6 – The Road Ahead

We were talking about sustainability in FRE 515 this week. During the class, maybe one of our classmates raised concerns and questions about managing the study load and pressure during the crunch time with exams and ongoing course work. Professor Ron mentioned about prioritizing which is a key in time management. Priorities change as things come up and down. For example, these few weeks, exam and presentation matters have come to the top of priorities, so the majority of my time, thoughts and emotions have been on them as well. Another comment made by classmate Gabi during the class discussion has also stuck in my head, which is lack of sleep for consecutive days or a longer time period is not sustainable for a person. Arise from the above comments, I want to be honest about the following:

I haven’t been able to keep an eye on the commodity market these days; I haven’t been up to date with the relevant daily news which creates difficulty for myself to make decisions in trading.
I realized that I was unfocused and careless after I found out a few mistakes I made in the trading this week; One of them was a major mistake and it created a very panicky day for me.

I sincerely hope that after this week’s Midterm (our last midterm), I will be able to fully come back to the trading mode.

Anyhow, for the mistake I made in my price limit order last Friday (misplacing the number of contracts and price limit), I ended up holding 37 short Corn contracts (C2Z). I am very worried about how to properly offset them. I have placed the Stop Loss order and Price limit order to try to offset them on Monday. I basically don’t hope to lose (too much) over these contracts rather than make a big gain. (I’d really love your comment on this.)

C2Z:

My Existing Shorts: Price-in: 739.75, Current Price: 737.75 (gaining $100 on each contract)
My Pending Longs to offset the above: Price Limit: 735 , Stop Loss: 740

On the other hand, I anticipate the prices of the crops to rise on Monday based on the following factors:

The crude futures went back up last Friday before the market closed after a two-week fall. I anticipate some rise on corn and soybeans on Monday attributed to the spillover effect from the crude futures^[1].
Asian currencies are strengthening^[2] which would likely to stimulate more imports to the region.
Good harvest news on corn and soybeans in Canada^[3]
Hurricane Sandy is coming to hit the northeast US (the graph below shows its strength and path). Although it’s a Category 1 hurricane it’s predicted to become a worst hit to the area in 100 years^[1]. The fear and the damage from this Hurricane would probably drive the prices up on Monday. (drive up the cash prices, the basis, and the futures prices)

Hurricane Sandy Oct 28, 2012
Source: wunderground.com^[4]

I will keep an eye on the daily News to correct or help further predictions over the week.

References:

1. Shenk, Mark and Zhou, Moming. (2012, Oct 26). Crude Pares Second Weekly Loss as Hurricane Approaches. Retrieved from http://www.bloomberg.com/news/2012-10-26/oil-fluctuates-as-u-s-economy-grows-more-than-forecast.html

2. Teso,Yumi. (2012, Oct 26). Asian Currencies Strengthen in Week on Signs of China Recovery.Retrieved from http://www.bloomberg.com/news/2012-10-26/asian-currencies-strengthen-in-week-on-signs-of-china-recovery.html

3. Shiells, Terryn . Service Canada. (2012, Oct 26).Ontario soybean/corn crops yielding better than expected. Retrieved from http://www.grainews.ca/news/ontario-soybean-corn-crops-yielding-better-than-expected/1001799451/

4. woundergroud.com. (2012, Oct 28). Hurricane Sandy. Retrieved from http://www.wunderground.com/tropical/tracking/at201218_5day.html?MR=1