The Ted Spread
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.
As the Dust Settles - Remember One Thing
Apr 02, 2013
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS 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.
The last two trade sessions saw the largest two day decline in corn prices. Today grains settled down a bit and closed mixed to unchanged. It seems that the drought bulls have been flushed out of the market and the selling panic has subsided. It is time to take a much needed break from watching the screen for the better part of 24 hours a day. But as you do, take some time to reflect and look forward.
Many producers were caught off guard buy the super bearish USDA report, shoot everyone was. The fact remains - The sharp decline in old crop prices hurt if you didn't have it all sold or protected. Events like this tend to make us want to bury our head in the sand and try to forget the whole thing. To that end I do feel like after today I finally have all my ducks in a row and I actually plan on getting some sleep tonight. But, this is not a time to busy yourself with other chores and forget about the markets. Now more then ever we all need to think about what just happened and where we going from here.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
This USDA catastrophe certainly does not inspire enthusiasm to watch the markets or make plans for the future. If you had unprotected or unsold old crop corn the best we can do right now is maybe buy a cheap put and sit and wait to see if prices get better in the last days of the marketing year. But we really need to be thinking about what to do with the crop we are all about to dedicate the next few months of our lives to. The bottom line is that although May and July corn took a major thumping, the December and beyond contracts fared far better comparatively. The fact of the matter is that December corn is only about 30 cents off pre report trading. I know saying only 30 cents is a hard pill to swallow, but lets look at the bright side here. Lets look at reality.
$5.30 plus corn makes money. $12.50 soybeans make money. $7.00 wheat makes money. Now is a time to take a long hard look at what happened this last summer. We had a major drought and we either ended up price rationing far better then anticipated, had a far better crop then anticipated, or imported far more corn then anticipated. This quagmire of the last two days should not be lost on anyone, all signs point to grains testing the low ends of the price spectrum in the coming years. With huge supplies in South America, larger then anticipated beginning stocks for next year, a questionable global economy and sagging demand the outcome seems inevitable.
Do not fall victim to complacency. Don't bury your head in the sand too long. All is not lost, at least not yet. Now is the time to be planning for the future. What happened this year is a wake up call and it highlights the fact that good prices and good profit margins in grains need to be protected for years to come. We need to be looking for opportunity to fortify our livelihoods rather then licking our wounds. It is time to dust ourselves off and get on it. Maybe not today, maybe not tomorrow but soon - very soon. American Farmers are the strongest people in the world, and don't ever forget it.
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May Corn Daily chart:
May Soybeans Daily chart:
May Wheat 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 corn near $7.00 and soybeans near $14.00. 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 options / options-futures 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 firstname.lastname@example.org
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?ap=tseifrie
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. 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