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The Ted Spread

RSS By: Ted Seifried, AgWeb.com

Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.

Things are getting a little weird up here

Jul 19, 2012

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.   

Corn and soybeans broke sharply off the highs coming into the pit session and things got stranger as the day went on.  Soybeans recovered well off the break and pushed back up toward highs as corn threatened to make new lows.  On the close spreads went wild highlighted buy the November 12 closing up 32 cents while November 13 soybeans closed down 26 cents.  So what is going on here?

Maybe you can explain soybeans being sharply higher and corn lower due to rains missing southern growing areas that were going through pod set for soybeans.  Maybe you can explain the sharp sell off on the pit open as fund selling.  And, maybe you can explain the sharp move in spreads toward 2012 as a function of the market knowing we will be short supplies this year yet also deeply worried about demand destruction and the potential for massive acreage next year.  Maybe the rumors on the floor are true and it's the automated algorithms to blame.  Or, maybe things just get a little strange when you're forging into uncharted territory.  One thing that needs to be a concern is that things tend to get weird at the end.

CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie

I really don't know that we have done enough price rationing to stifle demand, and I really do not know what the final yield will be for corn or soybeans but I have to say that price action over the last few days has been concerning, especially for corn.  And, as traders we look at the date and we know very well what this time of year usually means for corn and in a week or two for soybeans.

For now I am long and holding on.  But I see some warning signs out on the horizon and with all the wild things that we are seeing in the markets I take away one thing - caution.  Maybe corn and soybeans keep rallying for months and maybe the key reversal in November 13 soybeans does not mean anything but maybe this is indicative of topping action.  I don't know as my crystal ball is out for repairs but I do have an overwhelming urge to exit as much risk as I naturally can and wait for things to become less strange.

Options on Beans for People Who Don`t Know Beans About Options: http://www.zaner.com/offers/?page=8&ap=tseifrie

With high volatility in a weather market, option strategies may be a good tool for hedgers and specs alike.

December Corn Daily chart:

November Soybeans Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $7.70 and new crop soybeans above $16.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent.

Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs.

Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Please check out my Blog at: http://tedseifriedfutures.com/

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?rid=Seifried

 

Futures, options and forex trading is speculative in nature and involves substantial risk of loss. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION

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COMMENTS (1 Comments)

longkansascitywheat.wordpress.com - Nashville, TN
Okay Ted, I've learned to trust your experience, and do not doubt your hunch. One possible explanation for volatility and multiple negated reversals…are the technicals changing to catch up with the fundamentals? Certainly, we're at Major Resistance…B.K. said corn in the teens about 2 weeks ago...
7:50 PM Jul 19th
 

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