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.
This is Bigger then the Grain Markets
Jun 20, 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.
It has been a wild week, for grains and just about everything else too. As I write this stocks, metals, energies and just about everything except the US$ are down substantially. This comes after 3 days of very strong fund buying especially in the December corn. So what exactly is going on?
On Tuesday July corn closed the gap left in the wake of the last USDA quarterly grain stocks report. On Wednesday December corn closed at it's highest point since March 27th. Since then corn has given back a good portion of the gains. The sharp gains have been linked to aggressive fund buying especially in the December corn. But why? Fundamentals have not really changed this week. If anything you could argue that the fundamental makeup of the corn market has gotten a bit more bearish this week with weather looking ideal for the foreseeable future and acreage estimates coming out better then our worst fears. In spite of all this the funds decided they needed to be long new crop corn. This is likely due to things going on in everything except for corn. As funds have grown more and more nervous about being long the equities, metals, and energy markets they have looked for other places to hide away their money.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
Many times funds look for a market with mixed fundamentals, a sideways to higher technical set up and in particular something that is near the low end of its range. Corn really fit the bill for this one. And you have to imagine that last year's push to record high prices is also a motivating factor. So what do you get when the funds need to move a lot of money in a short period of time regardless of the current fundamental news of any particular market? And what happens when the market they choose is choppy and lower volume because of a huge upcoming report? Apparently you get a 50 cent rally off of recent lows.
Ok, so the funds wanted to buy corn and nobody saw it coming. There really was no rhyme or reason for this in the grains markets it was all coming from outside factors which made it very hard to predict or understand. But, now that the funds have done what they wanted to do has this changed the direction of the corn market? Maybe, but probably not. Granted we are only one day removed, but it seems that the funds that were buying like crazy the last 3 days are done at least for now. This leaves grain markets with going back to trade fundamentals, which seem bearish. There is also the matter of a huge USDA report on June 28th that has the potential to be very bearish. If anything we may look back at this and see that this was a gift. In the end I really feel this may have been a wonderful opportunity to sell higher prices.
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December Corn Daily chart:
November Soybeans Daily chart:
December 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 $5.50 and soybeans near $13.00. 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