Week 7 -What Went Wrong .. and Right

This week, I lost $9749.5 in offsetting 37 short corn contracts.  On the other hand, I gained $1543 on buying and selling 2 wheat contracts.  Here’s a recap and highlight of what happened.

Since I got myself into the situation of holding a large number of contracts again, I was looking for ways to offset them not only timely but also very carefully this time.  At first, I tried to use Price Limit and Stop Loss orders to do that.  However, the futures prices of corn didn’t change much on Monday and didn’t hit my price limit or stop loss price.  Although, the prices of corn on Monday went down in my favor,  I did anticipate that the prices would rise and rise quite rapidly in the next few days due to the damage done by the hurricane Sandy. When I was contemplating what to do, I got a message from Yijeong and she suggested that I could use Time Limit order to offset my short corn contracts at the open price (ie. setting the time: 9:30am) when I was still making profits.  I did so.  However, it turned out that when TradeSim processed more than 1 contract, there would be delay even though it’s a time limit order.  The corn prices rose on Tuesday and my 37 short corn contracts were offset with a major loss.

37 shorts on C2Z:  price in: 739.75, price out: 745.00  (this price was actually higher than the day’s highest price which is still puzzling me), realized loss: $9749.5

On Wednesday, I got up early and started to look at the news.  It appeared to me that the wheat price would rise that day based on the following and  news.

• The prices of wheat were rising shown on CME electronic trading page.
• Australian wheat export plunging^[1]
• Australian wheat showing lower protein, and Asian importers might be seeking more North American wheat^[2]
• Asian currencies are strengthening^[3]

I went long on 2 wheat contracts, W2Z.   The wheat futures prices went up on Wednesday, as well as Thursday. I placed a Price Limit order on Wednesday night to offset these contracts to lock in profits.  Both contracts were offset on Thursday.

2 longs on W2Z: price in: 869.00,  price out: 883.25, realized gain: $1543

Overall, I lost $8206.5.  Although I lost much more than I gained.  I think I have improved on strategies and analysis, so I am happy. =]

References:

1.  Javier, Luzi Ann and Sedgman, Phoebe. (2012, Oct 31). Australian Wheat Exports Plunging Most in Six Years: Commodities. Retrieved from http://www.bloomberg.com/news/2012-10-30/australian-wheat-exports-plunging-most-in-six-years-commodities.html

2.  Packham, Colin  and Naveen. (2012, Oct 31). Australia’s early wheat harvest shows lower protein. Retrieved from http://www.grainews.ca/news/australias-early-wheat-harvest-shows-lower-protein/1001809854/

3.   Karunungan, Lilian  and Teso,Yumi . (2012, Oct 31).   Asian Currencies Rise for Fifth Month on Recovery Optimism .Retrieved from  http://www.bloomberg.com/news/2012-10-31/asian-currencies-set-for-fifth-monthly-gain-on-recovery-optimism.html