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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 Up Sharply on Hotter, Drier Forecast

Jun 25, 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.   

A hotter, drier forecast over the weekend had grains open sharply higher in the Sunday night session open.  With 12 minutes left in the new extended pit traded hours corn is 40 cents higher, locked limit up with over 110k in the pool to buy at limit up.  Soybeans are also higher, up 49 cents.

The cooling trend we had seen in the forecast late last week looks to be short lived and a blast of hot air looks likely to follow the mild temps of Monday and Tuesday.  Currently it is a fantastic 72 degrees in Chicago, however some forecasts are predicting 102 degree temps again by Thursday.  This severe heat will put significant stress on the corn and soybean crops, specifically in the eastern part of the growing areas.  The timing on this is especially bad because in most of the driest areas we have corn moving to tassel in the next 5-10 days.  This could have a significant impact on yields in these areas and an impact on the national average yield.

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

It is too early to say that there has been a significant impact on the national average yield for corn but if we do not see some good rains soon we can say that there will be irreversible damage.  There is still a little more time for soybeans, however conditions are at a 10 year low and we need to see a dramatic change in the weather trend to see full yield potential for soybeans.

There are some rain prospects for late this week in the dry eastern growing areas.  For now the chances do not look great.  However, if the forecasts get more confidant on this event as the week moves on the markets may cool off.  This rain even may be the last reasonable chance for some guys to see their corn fields turn around.

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

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

* Charts are as of 1:20 CST so they do not reflect settlement prices

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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