WEEK 8 (Part 1): The Went Right/Wrong

WHAT WENT RIGHT? As mentioned in last week’s blog, I anticipated that all 3 commodities future prices to increase this week. On Monday (Oct.29^th) morning, I set up 1 price limit order for December wheat, as well as 4 different price limit contracts for January and March 2013 soybeans, because of the rumor on China increasing import demand for soybean, which could potentially increase the future prices dramatically. Fortunately, all the contracts were triggered sometimes during the day. I also managed to offset my short wheat contract from last week. Though there was some increase in price, futures prices for soybean didn’t show any signs of substantial increase until Tuesday (Oct 30^th). Both wheat and soybean prices spiked on Wednesday (Oct 31^st); I wasn’t sure how long they were going to increase for, and since I did have a large number of LONG contracts on hand, I tried to offset 1 soybean contract, and 1 wheat contract. The wheat contract was offset when wheat prices nearly reached its daily peaking price, and I earned $1061.50. The January 2012 soybean (S3F) contract failed to offset, because the price limit I set was never reached, which turned out to be a good thing as the soybean future prices further spiked on Thursday, which was totally unforeseen. According to Reuters Africa, China, world’s biggest soybean importer, was still the key cause to the boosting of soybean prices this week. Reuters Africa explained that October’s economic data from China revived and that there were signs of them increasing the imports for soybean. In addition, China’s annual harvest has decreased in a few key planting provinces. In addition, there was concern regarding South American’s soy crops being less than estimated, due to delayed planting caused by wet weather.

After seeing the price spiked yet again on Thursday (Nov 1^st) morning, I knew I wanted to offset all 4 soybean contracts, since the chance of them continuing to increase for an extra day was very slim. I sent in 4 price limit orders on Thursday (Nov 1^st) morning, and hoped that all of them would be offset successfully. While 3 of them did offset, one of the March 2013 soybean contract didn’t. From the 3 LONG soybean contracts that did offset, I managed to earn $1399.00 + $1674.00 + $1325.00 = $4398.00. I made an attempt to offset the LONG soybean contract again on Friday (Nov 2^nd) morning, along with another January 2013 Soybean contract going SHORT. Unfortunately, neither of the orders went through, and as of Friday, I have a potential loss of $162.50 on the March 2013 Soybean contract.

WHAT WENT WRONG? I really should’ve set a lower price limit for the LONG March 2013 Soybean contract (S3H), so that it could offset on Thursday (Nov 1^st). Also, instead of trying to get into the market on Friday (Nov 2^nd)morning (and failed), I should have sent in a few soybean contracts going SHORT before the market closed on Thursday (Nov 1^st); since it was obvious that soybean future prices could start dropping at any minute, after dramatically increasing for 3 days straight.

WHAT NOW? With the soybean future prices utterly decreasing, I still have a March 2013 Soybean contract in the market going LONG. From looking at the natural disasters that’s occurring all over the world, and the deleterious weather farmers face when planting, I anticipate that soybean future prices to increase in the long run. Hence, I’m going to be optimistic and keep the LONG S3H contract in the market until the soybean prices bounce up again.

End of Week 8 Balance: $46198.07

Reference

http://af.reuters.com/article/commoditiesNews/idAFL3E8M14XM20121101

http://futures.tradingcharts.com/intraday/ZSX2?anticache=1351825200