Aug 27, 2014
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August 2013 Archive for 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.

How will the Soybean Residual Effect USDA Balance Sheets?

Aug 29, 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.        

On the monthly USDA WASDE reports the USDA has a category on the soybean balance sheet that seems to serve as a "miscellaneous" entry.  This is the Soybean Residual figure.  I am not sure if there is a clear definition for this number, but it generally means demand that does not fall into the categories of - crushings, exports or seed.  The interesting thing about the soybean residual is that it has a wide range in recent years and apparently can even be a negative number.  Currently the USDA is estimating 29 million bushels for the 2013/2014 marketing year.  

The soybean residual figure is very difficult to estimate.  It is not crystal clear what makes up this category and there is no solid historical trend by which to go by.  About the only loose consistency that can be drawn from the last ten years is that the residual figure tends to be bigger in years with big carry overs and smaller or even negative in years with tight carry overs.  With the outlook for smaller production numbers for the 2013/2014 crop we have to wonder if the soybean residual number is going to play a role in lessening the potential tightness in soybeans in USDA reports to come.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

In the August USDA WASDE report the USDA lowered residual demand for the 2013/2014 crop by 4 million bushels from 33 million to 29 million.  With hot and dry conditions through much of August there is much talk around the market that crop stress in key growing areas will lower production potential.  If the USDA does have to lower their production numbers going forward it would seem that there might be quite a bit of room for the residual number to come down as well and offset some of the lower production.  This could be a year where the soybean residual number is small or negative.  

At 29 million bushels the current residual number is on the higher end of recent years.  For example, last year in 2012/2013 the USDA is estimating residual at 5 million bushels with their final number to be released next month.  In 2011/2012 the soybean residual figure was actually at -2 million bushels (that's right negative 2 million).  I am not sure how a demand number can be negative.  Is residual giving back or adding soybeans to the supply chain?  Either way, the residual number can be negative.  On the other end of the spectrum soybean residual was at 38 million bushels in 2010/2011 when carry over numbers we 225 million bushels.  So , it seems when cary over numbers are large (and prices are low) residual demand is high, but when carry over numbers are low (and prices are higher) residual demand can shrink to nothing or a negative number.   

The impact the soybean residual on upcoming USDA reports could be big.  As production estimates decline the residual demand number might also get smaller and partially offset the impact of lower production.  There have been a lot of lower production estimates recently mostly due to lower yields but also due to lower acreage estimates.  At this point it seems very unlikely to me that the USDA will make a third revision to acreage numbers at least until after the final harvest numbers come in.   

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

So, if we were to plug in the Pro Farmer production number (3.158) into the USDA balance sheet and lower residual demand by 25 million bushels while leaving everything else unchanged the end result would be about a 150 million bushel carry over.  At this point with higher US prices you could also argue that export demand could decline and imports to the US may increase with a big South American crop that has largely yet to be moved.  In the end the soybean residual may help to keep a lid on soybean prices.  However, if soybean yields slip below 40 bushels an acre then lowering the soybean residual will not be enough and some further price rationing may be needed. 

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?ap=tseifrie

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

Hot and Dry or Early Frost, a Catch 22

Aug 27, 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.        

Grains markets, soybeans in particular have rallied recently on weather concerns and ideas of declining yield prospects, but what exactly is the market so worried about?  The first few days of the rally in soybeans was largely due to talk of the possibility of an early frost causing major damages to the crops.  Then weather forecasts turned hot and dry and concern shifted to heat and moisture stress causing major declines in yield potential.  So, pick your poison either way corn and soybean yield potentials do not seem to be as good as we had thought.  

This growing season in the US has been a strange one.  In sharp contrast to last year's drought this year started with cool temps and an excess of rain causing a near record slow planting pace.  This was a concern for the market as late planted crops often have less yield potential because when crops are planted late the concern is that they will be going through key moisture sensitive times in the middle of the hottest stretch of the summer.  This was certainly not the case for corn as temperatures during pollination were well below normal.  For soybeans however the weather pattern turned to hot and dry at just the wrong time.  

For the most part, aside from a few weeks in early July, this growing season has seen below normal temperatures and at times well below normal.  While this has kept crops from being under major stress during dry stretches, it has also slowed the late planted crops from pushing toward maturity.  This opens up the possibility for an early frost to cause major crop damage.  So warmer temperatures were really needed to help crops mature.  However, July and August have been dry for major portions of the growing area and as temperatures heat up in late August it is putting stress on corn and really catching soybeans at a bad time.  Because soybeans are behind they are going through key moisture sensitive just as temperatures heat up.  So, we needed the heat but we really needed the rain first.  Without that rain this heat, although it is helping with maturity, is causing major stress at a bad time.  

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

With today's mid-day weather forecast rain chances were increased in the next 2 weeks.  This is a positive development for crops as rains are really needed.  However, on the heals of the rain even for early September is a rush of cold air coming in from Canada that could cause some frost damage in Canada and the upper Midwest.  So, it is very tough to tell at this point how this crop year is going to end up.  Will rains be helpful or too late?  Will this heat be enough to get help push crops toward maturity before the first frost?  With late planting and a cool summer crops need a near perfect end to the growing season to realize full yield potentials.  So far weather into September does not look perfect.  The hot and dry at the end of August wouldn't normally be a terrible thing for crops, and a frost in the second or third week in September wouldn't normally destroy an entire crop either.  But, the cold wet spring and the cool dry summer may have created something of a perfect storm for crops going into September.  

At this point it is very difficult to guess at what corn and soybean yields will end up.  In turn it makes it rather difficult to predict where prices will be going.  The weather uncertainty and fear of crop loss is doing what it usually does for grain markets and pushing prices higher.  When all is said and done and fear subsides it is very likely that we do still have a large corn carryover and soybeans could now be overpriced in the world market but for the moment the path of least resistance may be higher.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

How do I Sell Soybeans without Stepping in Front of a Freight Train?

Aug 22, 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.        

Corn, wheat and soybeans were sharply lower as rains fell on some of the dry areas in Iowa, Minnesota, Nebraska, Illinois and Wisconsin.  Additionally the mid-day weather forecast showed hints of more rains in the 2 week forecast for other dry areas that missed out on the rains of the last 24 hours.  

The rains were not a surprise event, but confidence had been low that the much needed rain would actually materialize.  So, as precip started to show up on radar screens yesterday afternoon and into the evening selling pressure mounted.  Soybeans made an attempt to rally back to unchanged early in the pit session on the idea that rains were not enough, but as the system held up through the day and soybeans ended with the lowest close of the week.  Is the party over for soybeans?  I can not say for sure as there certainly are more dry areas that need rain and frost is still a concern, but today's events really put a damper on the bullish market mentality.  

Spreads were active today as strong basis kept September contracts supported relative to deferred months.  One of the most interesting developments of the day for me was the movement in the November 2013 - November 2014 soybean spread.  November 2013 soybeans were down 17 1/4 cents today while November 2014 were only down 1/4.  This is a gain of 17 cent to November 2014 and it is a big one day move.  This would typically be considered bear spreading and could be hinting toward a change in market sentiment.  Most importantly, it seems that some of the bigger funds have been dealing a lot in spreads in recent history and could suggest that some of the bigger market players are getting bearish up here.  

This November 2013 - November 2014 soybean spread is something I have been following and recommending to my clients wanting to make sales after this fast and furious rally.  I believe it is a good way to manage a short position in soybeans right now.  From a hedge perspective you do give up some downside potential by being long the November 2014 but you also potentially reduce some risk and margin requirements are currently about 40% of a straight futures position.  The thing is, in my opinion you do not give up too much in the way of downside potential to out weigh the benefits vs being straight short November 2013 soybeans.   

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

When soybeans were down on lows the November 2013 contract held a 10 cent premium to November 2014.  Currently the November 2013 soybeans hold over a $1.02  premium over the November 2014 even after the 17 cent move today.  This would suggest that the spread could benefit by 92 cents on a move back to lows.  Right now November 2013 soybeans are a little over $1.20 off the recent lows and November 2014 soybeans are 30 cents off the low.  So it is possible that if soybeans go back to lows and both November 2013 and 2014 are hitting lows at the same time that spread could gain close to $1.00 while being short a November 2013 futures contract would gain $1.20 - $1.30. Given that margin on the spread is about 40% of a straight futures contract and that the risk could be less on the spread it would seem that the spread could be a good option.  

It also could be possible at some point for November 2014 soybeans to hold a premium over November 2013.  This would be a normal carry market which soybeans have not seen for a while due to tight ending stocks.  If ending stocks end up at a more normal level this year and especially if the US begins to increase imports of South American soybeans a normal carry market could be justified making the spread even more attractive at current levels.  

Now, it is important to understand that as always with futures trading there is significant risk involved.  This spread could go to $3.00 or more if there is a major crop failure like there was last year (i.e Major frost damage).  So do keep that in mind.  This spread is designed to take some risk off being short November 2013 soybeans by being long November 2014 but it may not.  Also, margin on this position is much less then a straight futures position which theoretically means you can do almost 3 of the spreads compared to 1 straight future which certainly adds more risk as well.  

Selling November 2013 soybeans has become much more attractive after the sharp rally in the last two weeks but can be very risky.  The November 2013 - 2014 spread is interesting and offers some nice potential benefits over being straight short futures.  Give me a call if you would like to hear more about it.  

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

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

Can Soybeans Sustain this Rally?

Aug 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.        

Last week the trade was concerned about an early frost damaging the crop.  This week the market is concerned about hot and dry conditions.  No matter what the forecast says we have been looking for bullish fodder since the USDA surprised the market with a bullish report.  

The rally in soybeans has been fast and furious.  This really suggests that some short positions were caught off guard by the bullish USDA report.  Since then we have been seeing any weather or news story trough the bull goggles.  But the reality of the matter is that things really are not that much different then a week and a half ago.  So far crop tours are suggesting that there are some good crops out there.  And it is important to note that the world carry over number actually increased on the August report despite the cut in US production.  

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

The Brazilian Real is trading at lows vs the US$ and South America has monster stocks of corn and soybeans.  With higher prices in the US it is only a matter of time before we start seeing large imports of South American grain.  Aside from that US crop conditions are still very good.  Conditions came down this week, but this is the time of year we would expect that.  There could be events, such as frost, that still could seriously hurt crops but until that were to happen it would seem likely that prices are too high, especially for soybeans after they have rallied over $1.30 off lows.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

Frost Concerns Become More Widespread

Aug 15, 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.        

Grain markets were sharply higher as frost concerns heat up.  I wrote an article a few weeks ago expressing my concern over an early or even normal frost causing damage.  With crops in good condition but well behind and below normal temps for most of the growing season concern is understandably growing.   So how much should grain prices rally?

A few weeks ago when I started talking about my concern for frost damage weather forecasters were generally in agreement that the chances of an early frost were low. Not only has the tone changed in the last few days, but traders have now started to figure out that a normal frost could cause some significant damage.  After a surprisingly bullish USDA report on Monday its interesting to see the bulls coming out of the woodwork citing any bullish piece of news and ignoring the bearish fundamentals that were center stage just a week ago.  I do think frost should be a big concern, and I do think that weather premium needed to be added especially to soybeans.  But, just as we may have gotten ahead of ourselves on the push to new lows we may now be getting ahead of ourselves on the idea of early frost.  

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

Until recently weather forecasters were predicting less then a 15% chance of an early frost.  My argument was that we had already seen an early frost on July 26th in some northern areas and that a normal frost could cause damage as well.  At the time the trade was caught up in good crop conditions and the potential for massive crops.  It seems that now forecasters and traders alike have swung to the other side of the pendulum.  Now forecasters are making comparisons to 1974 when an early frost caused major damage.  There are some similarities between 2003 and 1974, most importantly a cool wet spring causing late planting and cooler then normal temps in June and August.  Another concerning point is that the build up of cool air in the arctic is stronger this year then in most.  But, before we rally corn and soybeans back to record highs we should also consider that there have been many years where heat has come late and carried over into fall.  This could be the case this years as we are looking for a warm up in the coming weeks.  

At this point I believe frost is a concern and forecasts going into September need to be watched.  I do think that this uncertainty and potential for damage should translate into a weather premium at this point.  However, with crop conditions good  and some warmer temperatures in the forecast for late August it might be too early to get too excited.  The fact remains that if crops do escape the threat of frost damage we will have bigger carry over then what we have seen in recent years, especially in corn.  For soybeans, even though the US carry over number is not as massive as corn might be the world numbers are huge.  South America has product to sell and will need to get more moved soon.  If domestic US prices continue to rise South American imports could become more attractive and realistic.  

For now I think it is good that markets have added some weather premium in for fear of frost damage.  If nothing else it is providing opportunities to sell soybeans higher and corn may offer the same opportunity soon.  But that may be about it.  As of now I think frost is something the market should be concerned about but I also think the chances of major frost damage is relatively low, maybe 30% chance at most.  My gut feeling is that this warmer weather expected for late August could be a sign of warmer weather carrying over into September.  Even if frost is still in the cards for late September the warmer temps in front of it may do a lot to push crops toward maturity.  As usual with weather markets it could be volatile until we have a better idea about how this will play out.  For the moment my bias is toward missing any major frost damage and lower prices into harvest.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

So What do We Make of This USDA Nonsense?

Aug 13, 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 August USDA report came out as a big surprise, and as usual when the USDA gives us a surprise there are many people crying foul.  Markets were sharply higher on the unexpectedly bullish report, but as the dust settles grains are trying to break out in different directions.  So in the aftermath of this report what can we make out of it and where do we go from here?  

The USDA shocked the market by lowering corn and soybean yields, soybean acreage and US carry over numbers.  The trade was looking for lower soybean yields, but ending stocks came in significantly lower then expected.  For corn the trade was looking for an increase in yield and carry over while the USDA apparently had different ideas, lowering both.  And as usual when the USDA has something different then the trade estimates there are lots of people from all over the place saying the USDA is wrong.  So far this year we have seen similar complaints with prospective acreage, planted acreage, at least 2 of the quarterly grain stocks reports, even crop progress and now this.  Now I am not saying that the USDA is right, and I'm also not saying that are wrong but I've said it before and I'll say it again - these are the numbers we have to trade.  

This time I find it pretty interesting that some large funds have stepped out and said that the USDA is off their rocker.  That's funny, these are usually the guys we assume are paying the USDA to fiddle with numbers.  Maybe the check bounced...  All kidding aside, it appears no one is immune to being wrong from time to time.  This time, I do tend to agree with most people that are saying that the USDA got it wrong.  I agree that their reasoning and using a 5-year average is suspect.  This year sure feels quite unique from any of the last five years not to mention that last year should be thrown out as a statistical outlier.  But, if you have been following my scribblings you know that I have been expecting lower yields come harvest, I just don't get the USDA's train of thought for this report.  Crop conditions are good but crops are behind.  To me that would have been the perfect recipe for a "wait and see" approach for the USDA.  Anyway, I know I sound like a broken record but - these are the numbers we have to trade.  

The bottom line is that even with a 122 million bushel reduction in ending stocks in corn the carry over is still 1.837 billion bushels.  So what is the difference between a 1.837 billion and a 1.959 billion bushel cary over in corn?  Well, 122 million.  Duh...  Sorry, I seem to be in a mood today...  The point is that huge is huge and 122 million seems like nothing in comparison.  Price wise, I'm not sure there is a difference.  

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For soybeans a 75 million bushel reduction ending stocks is a big deal.  This represents a 26% reduction in US ending stocks.  And, at face value this is a game changer for soybeans.  However, after digging into the report a little more and realizing that the world carryover for soybeans actually increased despite the lower US number things do not seem so concerning.  There are a lot of soybeans in the world today.  At some point the stocks in South America need to get moved on a large scale.  So I have to wonder if 220 million bushels is the tightest balance sheet we are going to see from the USDA.  Also, 220 million bushels is not much, but running on tight ending stocks in soybeans has kind of become the norm in recent years and it is certainly more comfortable then the 125 million bushels last year.  So this report may have elevated the floor in soybeans a bit at least until we begin to import South American soybeans on a larger scale.  

On a side note, what are we going to have to do to get the USDA to move major reports to an 8 AM CST release time?  This trading through reports business is dangerous and frustrating.  There are computers that get and trade the info before any human has the chance to see it.  I do get that there are lobbyists for hedge fund traders out there making it tough for the USDA to make a change, but actual human beings have to count for something right?  USDA please come to your senses and release reports during the 45 minute pause in the morning so that we can read the report, have a cup of coffee and think for a second before everything goes nuts.  Remember the good old days?  

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

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

Early Thoughts on the Upcoming USDA Report

Aug 08, 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 trade guesses are out for the August USDA report.  The average guesses have corn yield and production increasing and soybean yield and production decreasing.  So, at face value the trade is looking for a bearish corn report and a slightly bullish soybean report.  However, I would not be surprised if the USDA takes a more conservative approach this time.  

The first observation to be made here is the that the yield and production numbers from last year stick out like a sore thumb.  This time last year we all knew that it was going to be a tough year for yields and most likely a very good year for prices.  Looking at where we were last year certainly puts this years situation in perspective.  

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

The second thing we are looking at is corn yield.  The trade believes that yield numbers should be going higher at this point.  Now, crop conditions are good but progress is a week to ten days behind.  For this reason I think it may be a little early for the USDA to make any drastic changes.  Also, crop conditions in a big part of the Western corn belt continue to be under pressure, particularly in a large part of Iowa. A lower yield number in Iowa could have more of an impact on the national yield then say a smaller producing state like North Carolina.  This could mean that there is a bigger impact on yield then what the national average conditions would suggest.  We think that the corn yield number could actually go down in the end, especially if there were to be any frost damage.  Currently our corn yield number is 155.25, 1.25 bu an acre lower then the July USDA est.  This could change significantly if there were any frost damage.  

Finally, the trade is expecting a decrease in soybean yield.  Here too it may bee too early for the USDA to make any drastic changes.  Again, crop conditions are good but progress is behind.  It would make sense for the USDA to wait for the September report to see how soybeans get through pod set.  Again, this could be a situation where the national average crop conditions may be a little misleading.  The wild card for the soybean market could be an adjustment to planted acreage.  Our current yield estimate for soybeans is 44 bu an acre, .5 below the USDA.  

This USDA report may come out with few changes from last month's report.  If this is the case it would mean that corn production numbers could come in below estimates while soybean numbers come in slightly higher.  Grains as a whole have been under quite a bit of pressure lately, but price action in corn and wheat has been a little better to start the week.  From a technical perspective grains markets are very oversold.  Corn and wheat may be at a point where they can bounce or trade sideways to correct this oversold condition.  Keep an eye on corn and wheat, and stay tuned for weather as at some point markets could get concerned about crops being behind and the possibility of frost damage.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

Price Action for Corn And Wheat Gets a Little More Positive

Aug 06, 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.        

Corn and wheat were under pressure early today but bounced well off the lows going into the close.  Soybeans however remained under pressure as they shed some weather premium.  Technical indicators point to very oversold grain markets and could be suggesting a bounce or sideways trade in the near future.  

After a tough day yesterday and early selling pressure today wheat was able to manage a positive close on the day.  Corn closed lower on the day, but for the second day in a row found some buying interest in the last few minutes.  Both corn and wheat could be due for a bounce but for different reasons.  Now that the bulk of the harvest pressure has fallen away for the wheat it could be time for a post harvest bounce.  Most likely any bounce in wheat would be short and unimpressive however if corn and soybeans stay under pressure.   

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

Corn could be due for a bounce here too.  The corn market has worked hard in the last few weeks to take weather uncertainty out of the market once we knew corn would get through pollination without any major issues.  Now that the hot and dry weather uncertainty has mostly been pulled out, corn has gotten very oversold from a technical standpoint.  And, there may be a new weather issue lurking around the corner.  Corn conditions are very good right now in most places however progress is behind.  Late planting due to a cold and wet spring along with below average temps in the last few weeks has left the crop a week to ten days behind.  This could leave the door open for frost damage.  Even though most forecasters are not calling for an early frost we might need a little more time then normal which could be risky if temperatures do not start getting much warmer for August.  

Soybeans may still have some weather premium to pull out of prices.  The key moisture sensitive stage for soybeans comes later then for corn, so in many years soybeans will hold onto weather premium longer until we have a better idea of how weather will be for pod set.  Now that we are into August and the weather forecast looks mostly normal it might be time to take out some more weather premium as the uncertainty falls away.  Soybeans may be in a sense playing catch up to corn for a week or so.  Here too however, weather may become a positive force at some point with progress being behind.  

So grains as a whole have been under quite a bit of pressure lately, but price action in corn and wheat has been a little better to start the week.  From a technical perspective grains markets are very oversold.  Corn and wheat may be at a point where they can bounce or trade sideways to correct this oversold condition.  Keep an eye on corn and wheat, and stay tuned for weather as at some point markets could get concerned about crops being behind and the possibility of frost damage.  

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

What Happened to the Tight Old Crop Grain Situation?

Aug 01, 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.        

A few weeks ago we were watching August soybeans go higher seemingly everyday.  Then all of the sudden the bottom fell out.  To some extent we were expecting this, but we didn't know exactly when and how.  After almost a $2.00 decline the August soybeans have traded sideways.  So is the tight old crop grain situation gone for good?  

About two weeks ago the Chinese government announced they would release 3 million metric tonnes of state reserves to their biggest end users with the intention of easing their tight cash market.  It worked, probably better then expected in large part because it triggered a collapse in US basis at the ports.  The idea is that China would not be buying any US old crop soybeans anytime soon.  The collapse also spilled over to corn as well.  

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

The China news itself was not enough reason to cause such a sharp break.  There had been large spread traders who had been doing very well being long August Soybeans and short November.  When the China news hit it caused the masses to run for the door.  So the move was likely exaggerated by speculation, as most sharp moves are.  But what happens now that the dust has settled?  

August soybeans are now in delivery period, so we will see in the weeks to come if commercials try to use the board to source soybeans at current prices.  This could certainly be the case if basis strengthens in the days to come.  Once August is off the board for soybeans and now that July corn is off the board it become a little tricky to determine where old crop bulls will express their bullish enthusiasm.  I would think that the September - December corn spread and the September - November Soybeans spread would be the likely target.  This is not a for sure thing however as September contract can take on old crop or new crop characteristics depending on the year.  With the late planting this year and the tight situation left over from last year it would make sense for the September contracts to act more like old crop.  

If this is the case, it would seem that there is lots of room for the Sep-Dec corn spread and the Sep-Nov soybeans spreads to widen toward the September contracts.  Currently the September corn contract holds just 20 cents premium over December.  The September soybeans hold just a 42 cent premium over November while August is still 1.60 over November even after the recent crash in that spread.  So, it would seem that if we are still concerned about the tight old crop situation and the September contracts take on more of an old crop stance (which would seem realistic considering late planting) then there should be room to add a decent amount of premium to September in the spreads.   

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

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 $5.00 and soybeans near $12.00. 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?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.

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