Sep 30, 2014
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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.

Grains are Having a Hard Time Holding Gains

Sep 04, 2012

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.   

When I looked at the night session trade after a holiday weekend I thought I was seeing the making of another sharp rally day in the grains.  I saw soybeans up 30 and corn up 10 and wondered to myself if we would double those gains by the time the pit opened in the morning.  We had seen that scenario so many times in the last few months so why not?  By the time I had checked in this morning grains were trading well off their highs but gave it the old collage try again after the pit opened.  Corn rallied to new highs and soybeans got within 5 cents.  About an hour later the bullish enthusiasm faded and corn was doing everything it could to hold unchanged. 

This story is starkly different then months past.  Yes, soybeans made a new high today but then proceeded to close 20 cents off those highs.  Corn did manage to close higher on the day but also 10 cents off highs and yet another failure at $8.18 resistance.  The price action here seems to be weakening.  There needs to be some new bullish fodder to get this old bull to run.  This could come from lower yield estimates or maybe the FED will come in and announce QE3.  Either way, judging from current price action, we need something to keep this thing going.

When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=tseifrie

Everyone mark your calendars for the 12th of September as it is going to be an interesting day for grains traders.  We have our monthly installment of the USDA's fun (some prefer to say funny) numbers.  And later that same day we have a FOMC decision.  This could set up for a wild day.  Normally the FOMC meetings have a marginal impact on grain prices but this one looks like it is turning into a big deal.  It seems that the guys who pay attention to these sorts of things are placing big bets on QE3 yes or QE3 no.  This puts the markets in a position where there will be a major reaction one way or another, just like the Sep 12th USDA Crop Production and Supply and Demand report.  One or both of these events on September 12th need to be bullish to keep the rally in grains going.  Much more of my thoughts on both of these in later posts...

Patience may be a virtue for now, but waiting to long could have its consequences as demand should not be as difficult to ration in a questionable global economy - as the USDA has been hinting toward by lowering demand more then expected on the last two monthly reports.

Knowing that the technical traders will be nervous longs, the possibility that we will have a vacuum of new bullish fodder over the next few weeks, and the potential for producers to hedge at what are currently great prices - I have to be concerned that when this mature bull turns it may be violent.

***Also interesting of note is that the November-May soybean spread narrowed by 22 cents today reeling in a wildly inverted market.  This inversion is common in a strong bull market but the narrowing could be bearish.  It could also simply be the market adding incentive to store soybeans rather then sell on harvest.  Either way I think the November-May soybean spread will continue to narrow and this is a great way to get short soybeans if you feel the need.  The great thing about it is that this spread could narrow quickly if the soybeans sell off because the November has the potential to sell off more then the May, but if today is any indication even on a rally the May might still gain on November to entice storage.  I will be looking to add to my position here if there is a small correction of today's sharp move.

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

With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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 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.  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

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