Now that I have learned my lesson of not taking opposition future positions, I changed from long on corn to short on corn, and short on soybeans.
Logically speaking, my approach is correct, since soybean and corn prices have linkages within the feedlot and crusher market. Surplus in corn market would also drive down prices of soybeans in the market. If feedlots demand for corn has been saturated.. so as soybeans. As corn price decreases, the market price linkage, in effect, offset the price drop in corn by transmitting the effect of lower prices to soybeans.
However, I have not taken into account that since corn contract is in March and soybeans contract is in January.. the time difference implies that these two crops could face different shocks.
In effect, corn and soybeans prices are always consistently moving in tandem. Thus, this explains the reason why I incurred a $112.50*2 = $225 in corn, when I have a gain of $562 in my soybean contract.
Net gain: $337; equity balance: $25,420.64
Holding 15 – short on C3H mark to market
price in: 740.25
today’s price: 742.50
committed: $1917.50
gain/loss: $-112.50
Holding 16 – short on C3H mark to market
price in: 740.25
today’s price: 742.50
committed: $1917.50
gain/loss: $-112.50
Holding 20 – short on S3F mark to market
price in: 1538.00
today’s price: 1526.75
committed: $3800.00
gain/loss: $562.50
Great job! I like your analysis. Good going!
Thanks Yijeong. I am hoping to learn more about technical analysis from my classmates.