There was no trading done on Monday and Tuesday, because I wasn’t sure which way the market was going after the release of last Friday’s USDA report. Also, the goal was to use the “spread order” to reduce risk this week.
In general, commodity prices were pressured during the past week. Prices were brought down by the increase of fund selling, as well as early corn and soybean harvesting.
Wednesday (Oct. 3rd )
| POSITION | SUBMIT DATE | TYPE | CONTRACT | QUANTITY | EXECUTED |
| SHORT | Oct 3rd | Market Spread | W2Z | 1 | Yes |
| LONG | Oct 3rd | Market Spread | W3H | 1 | Yes |
Potential Loss/Gain
I decided to put a spread order on wheat, since spring wheat futures prices have been fluctuating up and down last week. Looking at the pattern, wheat futures increased on Wednesday, and decreased on Friday. December contract increased, but March contract decreased on Thursday. Decreased wheat price was partially due to the slightly lower than previously estimated harvesting. For instance, Statistic Canada’s estimated domestic wheat production was 26.73 MMT, which was lower than the anticipated 27 MMT. Kona Haque, head of agricultural research at Macquarie Securities, said that harvest pressure is the biggest pressure for crop prices.
Instead of offsetting them at the same time, I’m going to wait for wheat price to drop to offset W2Z, since it’s currently in the SHORT position, and offset the currently LONG W3H after the prices bounces up.
Thursday (Oct.4th)
Missed Opportunity for Possible Gain?!
Earlier last week, soybean price dropped by nearly 2% and hit 3 month low due to unanticipated good harvest yields. The better-than-expected harvest was a result of the August rain, which strengthened the drought-stressed crop. As well, shower in southern Brazil and Argentina also contributed to rising crop potentials.
After observing soybean price drop for 2 days straight, I decided to take advantage of the upcoming price spike after soybean future hits limit down. Soybean price stopped its drastic drop, and started to fluctuate on Wednesday. Although there was an increase in price, soybean future wasn’t skyrocketing. Instead of going LONG on Wednesday, I wanted to wait until Thursday to see where the soybean market was heading, before sending in my order.
However, by the time I checked the soybean price on Thursday morning, price has already rebounded. I wasn’t risky enough to go LONG after the soybean future shot up by 27 cents already. Hence, I decided to put a hold onto my LONG order for soybean.
I really should have entered the soybean market on Wednesday, and left it overnight to catch Thursday’s price spike. I lost by losing the potential gain that I could’ve received from going LONG while the soybean price was high.
Above is the soybean future intraday chart, screen captured on Thursday after the market was closed. I should’ve entered the market on Wednesday (Oct. 3rd); just before price bounced up.
Reference
http://af.reuters.com/article/commoditiesNews/idAFL3E8L26AR20121002
http://www.agriculture.com/markets/analysis/soybeans/soybes-rebound-grains-end-mixed_10-ar26708
http://futures.tradingcharts.com/intraday/SX2?anticache=1349400361
http://www.reuters.com/article/2012/10/04/crops-canada-idUSL1E8L38VH20121004?type=marketsNews
http://www.farminguk.com/news/Australia-s-wheat-production-prospects-continue-to-decline_24319.html
9 replies on “WEEK 4 (Part 1): The Went Right/Wrong”
Hi, Vicky 🙂
Whenever I visit your blog, I thought that you are really good at blogging!
It’s well organized, understandable and resourceful.
I was glad that you did spread order on wheat this week. As you know, I was so sure that corn and wheat future price would go up because of increasing dollar value, and high demand from livestock farmers, ethanol plant and food makers. I should do spread order like you did to minimize possible risks. I lost a lot this week….. Anyway, I also found that USDA will update its forecast of the corn and soybean harvest on October 11. This update will change all corn, wheat and soybean future price, so I think we should keep an eye on USDA report. I wonder which position you will be the following week. Based on my research, I decided to be in long position in soybean and short position in wheat and corn. This is my first time to do market order for soybean, so I really hope that it will work well.
If you don’t mind, I would like to recommend you to go to the website http://www.agriculture.com/
It shows agriculture weather maps and forecasts for farmers as well as weekly moisture index and palmer drought index. I think that this will be another helpful resource to your trading!
Happy Thanksgiving! Hope you have great long weekends!
Hey, Cindy,
While I did use the spread order to reduce risk, it didn’t feel like it was that useful (could be because there wasn’t much fluctuation in wheat price last week). It did reduce my loss to some extent, but I still lost quite a bit. Also, I was confused about wheat market’s price pattern on Thursday; the December contract increased in price, but March contract dropped. I thought prices for the same commodity should always behave the same way, especially when they are “neighboring” contracts? On top of that, my potential realized gain/loss for Wednesday, Thursday and Friday ended up to be the same number: -$517.50. I don’t think it’s always like that, so I choose to believe that it was a coincidence that the “potential gain/loss” ended up to be the same value for all 3 days. What do you think? Please let me know if it’s like that with you when you do your spread order next week!
I ‘m likely to place an order on soybean too, except I think I’m going to go SHORT for soybean instead of taking the LONG position. I’m a bit uncertain about wheat and corn. I still have 2 contracts of wheat in the market, so I’m most likely to offset them sometimes during the week! Good luck with the spread order next week!!
Thank you for suggesting the agriculture website to me! I’m definitely going to looking into it and try to put it in good use for the upcoming weeks!
Happy Turkey weekend yourself, amigo! 😉
Hi, Vicky 🙂
Whenever I visit your blog, I thought that you are really good at blogging!
It’s well organized, understandable and resourceful.
I was glad that you did spread order on wheat this week. As you know, I was so sure that corn and wheat future price would go up because of increasing dollar value, and high demand from livestock farmers, ethanol plant and food makers. I should do spread order like you did to minimize possible risks. I lost a lot this week….. Anyway, I also found that USDA will update its forecast of the corn and soybean harvest on October 11. This update will change all corn, wheat and soybean future price, so I think we should keep an eye on USDA report. I wonder which position you will be the following week. Based on my research, I decided to be in long position in soybean and short position in wheat and corn. This is my first time to do market order for soybean, so I really hope that it will work well.
If you don’t mind, I would like to recommend you to go to the website http://www.agriculture.com/
It shows agriculture weather maps and forecasts for farmers as well as weekly moisture index and palmer drought index. I think that this will be another helpful resource to your trading!
Happy Thanksgiving! Hope you have great long weekends!
Hi Vicky,
I have to make the same compliment as Cindy did in the first place–you are really good at writing the blogs!
I never thought of putting charts and graphs in the blog before, and I never use such many sources…Your delicate format, your effort and your well organization indeed give me a wake-up call. Reading your blog makes me really hate my own writing…
I have also read the sources you recommand, which ae great for me to refer to when making the next week purchases.
We have been working in groups for others courses already, in which I find your leadership and carefulness. This is the first time I read your blog, and I think you have one more thing I can learn from!
Wish you a happy thanks giving and great long weekend:) 🙂 See you on Wednesday!!!
Hey Amelia! I’m really glad that you like my blogs. I have been visiting your blogs for the past 3 weeks too, and I think your blog is great! I’ll probably comment on it sometimes soon! 😀
I think what’s really important is to be able to make accurate predictions based on the information gathered, and I clearly still need to improve on that! Good luck to us both in the coming weeks!
Happy Thanksgiving to you too! TURKEY! =)
Vicky, I abandoned my tracking sheet last week because I totally forgot about it… after I have seen yours, I have updated mine.. and I realized I behaved so funny and senseless last week. haha.. XD Thanks for being so clear minded and detail oriented.
Haha. Oh, Roson! You are hilarious!
After the dramatic week you just had, I’m sure you’ll get your head back in the game, and do EXCELLENT this week!! I’m looking forward to hear the good news from you next weekend. =)
Vicky, I had dream last night. I dreamed of soybeans prices going up.. above the price I got them. =P I wish my dream to come true. Happy Thanksgiving. 😉
Haha. prices have been quite stable today, have they? At least for soybean and wheat. I’ve been waiting for wheat to either go UP or go DOWN by more than 10 cents for almost a week now. They are stuck on my reversed spread order.
Speaking of dreams though..I woke up early this morning to check news and cme prices. I place an order on soybean and went right back to sleep until now (unplanned). What an dedicated trader I am..NOT. 😛
Happy Turkey Day! 🙂