Hello Everyone

Officially, this is the last week of future trading game and finally, I am climbing up and moving towards the “Team Green” who are currently making positive profit. Following are the main strategy that I want to share with everyone which helped me to achieve such goal.

At the beginning of this week, the idea of testing spread strategy kept popping up in my mind and the curiosity of whether it will work urged me to give it a try. Soon after taking a close look into the past price spread data, I have to admit it is true that speculating on spread changes are more difficult than only speculating on price change and certainly for me at the current level, it is almost impossible to correctly predict whether the spread is narrowing or widening. However, during the try out, I was able to discover something useful to help decrease my loss and even make a turn around to actually gain profit on my trading.

The strategy is to take offsetting positions in different contract months for the same commodity that you are continuously loosing money on and increase the numbers of contract that you are offsetting. Even though it may have the same effect as you just admitting your lost by liquidating your current position and then taking the opposite position on the same contract to gain profit, that strategies can not only give you a more direct observation of price movements among different contract months, which would provide you an opportunity to actually speculating on the spread change, but also, it can reduce the risk of the market goes against you again after you making those adjustments. If the market does goes against you again, by having two different positions of the same commodity will always make you better off comparing to when you only have one position and have to take the whole burden of the lost.

I performed this strategy on both Orange Juice and Lean Hog, while the results turned out be to satisfying, and eventually, I was able to end the long losing situation on both of my contract and gained profit on them. With that being said, it might due to the underlying fact that both Orange Juice and Lean Hog prices have a stable trend (either going up or down) relatively to the volatile price movements that occurred in grains. Also, the numbers of contracts that you chose to offset have a great impact in this play.

Other than the above, I also made profits on wheat future by trading regularly while following the general rule of “buy low sell high” and I left my money cow Sugar and bitter bean Coffee contracts open to be carried forward into the extra week.

A lot of analysis, a bit of luck, those are the perfect companions for the trading game.

If they are balanced well enough, you would really enjoy the game.

Bye for Now,

W.X