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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.

Death to the Dome of Death?

Jun 21, 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.   

 

Grains fell overnight as rains covered Iowa but as the morning broke it looked more and more likely that the front would fall apart as it crossed the Mississippi river, and it did.  As the rains started to fall off our radar screens corn and soybeans made their way back toward unchanged and corn even broke yesterdays high.  However, as the day wore on the rains re-organized and all of the sudden some of the drier areas were either getting rain or had renewed hope of getting rain.  Now, the totals on this second wave were pretty light.  But some of the dry areas got some relief that may carry them over for a few days at least.  The bigger question here is how did this happen? 

The forecast models seemed to be spot on by predicting that this system would peter out along the Mississippi but the second wave of rains was unexpected and to some extent a little head scratching.  This is interesting because the rains re-emerged smack dab in the middle of what we had been considering the "dome of death" or the high pressure ridge that had been besting rain advances for weeks.  Could this be a signal that this high pressure ridge is now weakening?

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

The rain totals were not enough to pull crops out of stress for the areas that did get rain, and the rains sure missed some very dry areas as well.  However, with the forecast for normal to below normal temps for the very dry eastern and southern growing areas, today's rain event could be suggesting a change in the weather pattern which couldn't come soon enough for some guys and maybe too late for others.

The weather forecast for the next few days will be paramount for market direction.  I feel funny saying that, because duh, but corn and soybean yields will be determined by whether this high pressure ridge is broken for good or if it begins to strengthen again.  If the forecast stays cool for the eastern and southern areas I would not be surprised if more rain would crop up in the forecast in the coming days.  If temps start to move back to above normal then rain events may be very few and far between.

On a side note but also potentially bearish note for grains, the US Dollar is up 82 points as I write this.  The Dollar held 50-day moving average support and could now be setting up to make another run at highs.  Other commodities were affected by this today as well.  For example, crude oil was down over $3.00 today and closing below $80 for the first time in a long while.

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

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

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 $5.60 and new crop soybeans above $13.80. 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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