Apr 19, 2014
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June 2012 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.

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

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

Rain Makes Grain, No Rain Makes Rally

Jun 19, 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.   

Rain Makes Grain, No Rain Makes Rally

Corn and soybeans have seen a dramatic rally in the last two days.  The thought late last week that the hot and dry ridge over the eastern and southern growing areas has been replaced by more hot and dry weather in the two week forecast.  There is a chance for rain later this week and again early next week, however totals look spotty.

The fact of the matter is that corn conditions have dropped 14% in the good to excellent category over the last three weeks and soybean conditions are the worst in ten years for this time of year.  Soybean conditions are 29% poor to very poor in Missouri, and 26% poor to very poor in Indiana.  The heat early this week will add to that stress and there is a good chance that the drier areas will miss out on any good rains.

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

In the mean time the US dollar helped support grain prices as it was down over 70 points at times today.  This was due to thoughts of the FED announcing QE3 tomorrow after the conclusion of their two day FOMC meeting.

Also, once we get into the delivery period for July corn we will likely see commercials use the CBOT board to try to force deliveries along the Mississippi at a large discount to cash.  This should continue until the discount in futures is small enough that there is no longer any benefit.  This could come from either higher futures, lower basis or (most likely) a combination of the two.  Either way this could definitely provide strong support to the old crop corn prices and in turn may spill over into the new crop as well.

It will take a significant change in the weather forecast toward a cooler wetter pattern specifically in the eastern and southern growing areas to draw the bullish mentality out of the market.  However, in a weather market anything is possible.  A tropical depression coming up through the gulf would change things in a hurry.

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

With high volatility in a weather 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 $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

New Crop Corn and Soybeans under Pressure from Weather

Jun 13, 2012

Both new crop corn and new crop soybeans were under pressure today due to a forecast calling for a wide spread rain event next week.  The thought is that the yield eating "dome of death" or hot and dry ridge may be dissipating.  However, we are still going to see some of the hottest temps of the year in front of the rain chances we see in the forecast.  I would think that as we move toward the hot temp this weekend corn and soybeans could find some footing and maybe take back some of today's losses.  The fact of the matter is that corn conditions have dropped 11% in the good to excellent category over the last three weeks.  The heat in the coming days will add to that stress and until the rain hits the ground there is still a chance that the drier areas will miss out.

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

Old crop corn has a different story.  Basis continues to widen with cash well over futures.  Once we get into the delivery period for July corn we will likely see commercials use the CBOT board to try to force deliveries along the Mississippi at a large discount to cash.  This should continue until the discount in futures is small enough that there is no longer any benefit.  This could come from either higher futures, lower basis or (most likely) a combination of the two.  Either way this could definitely provide strong support to the old crop corn prices and in turn may spill over into the new crop as well.

December Corn Daily chart:

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

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 $5.00 and new crop soybeans above $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 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

Planting Progress 6/11

Jun 11, 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.   

 

Planting Progress 6/11

The USDA released the weekly Crop Progress report this afternoon.  With hot and dry conditions at the end of last week, traders are looking closely at the effect that might of had on the condition of crops.  However, many of the dry areas did get some rains today.  With the monthly USDA supply/demand and crop production report coming out tomorrow the effect of this report may be short lived.

The biggest factors for direction in the near term will be weather and the USDA report tomorrow.  If weather turns wetter in weeks to come then we could be getting near highs for the next few months, however if a hot and dry pattern persists we could continue to rally prices for now.

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

Corn condition did take a hit from the hot and dry conditions late last week.  The USDA is reporting the corn crop at 66% good to excellent down 6% from last week at 72%.  This represents an 11% drop in conditions over the past three weeks.  Also, corn conditions are 3% lower in the good to excellent category then last year which was at 69% at this time.

See December Corn Daily chart:

Wheat numbers were mixed with the Winter Wheat crop condition improving by 1% to 53% good to excellent compared to 52% last week and 35% last year.  Spring wheat conditions declined 3% to 75% good to excellent compared to 78% last week and 68% last year.

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

See December Wheat chart:

The USDA is reporting a 5 % decline in soybean conditions at 60% good to excellent compared to 65% last week and 67% last year.

See November Soybean Daily chart:

The reaction to this report could be slightly bullish for corn and soybeans because of the 6% and 5% drop in the good to excellent category respectively, however the crop still looks good as long as weather cooperates in weeks to come.  Wheat could find a mixed reaction with winter wheat conditions improving slightly and spring wheat conditions declining.  Here again though, both winter wheat and spring wheat conditions are good overall. 

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 in the $5.30 range and new crop wheat in the $6.70 range. 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

New Crop Corn and Soybeans Breakout!

Jun 07, 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.   

 

New Crop Corn and Soybeans Breakout!

Despite another disappointing export sales report row crops were able post a strong up day and break out above resistance levels.  The weather forecast this morning was a little drier in the midwest for the next two weeks adding to concern that we could be moving into a hot a dry period that will put stress on crops.  In the near term we are looking at hot temps this weekend followed by a chance of rain Monday into Tuesday.  However this rain event projected for early next week has started to look questionable as far as coverage and amounts of precip.  On top of the bullish weather outlook, last night the Chinese Government lowered interest rates to stimulate their economy.  This put pressure on the US dollar as well as gave grain traders hope for stronger export demand going forward.

In the last two days we have seen the EU and China move to stimulate economic growth.  This has pulled the US dollar off of its highs and planted the seed for the FED to follow suit with a stimulus package of their own.  However, when Ben Bernake spoke mid day today he did not hint toward the possibility of a third round of quantitative easing.  The Feds stance at this point may end up being more of a wait and see attitude looking to see if further stimulus in the US would be necessary and/or helpful for the global economy or if in fact stimulus in the EU and China will trickle back into the US economy as well.

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

I think it is likely that the Fed does not take action at this time under the premise that another round of quantitative easing would have little effect and therefore would cost more (in the form of inflationary pressure) then it would be worth in short term stimulus.  That being said, I also think that the actions taken by the EU were too little to have any major effect and the issues in the EU will persist.  If this is the case we could see the US Dollar recover to make new highs.

Certainly weather is going to be the biggest determining factor in the overall direction of the corn and soybeans.  If weather forecasts continue to reflect hot and dry conditions it is possible that higher new crop prices will follow.  However, if the weather forecasts move to a more normal scenario then this may be a fantastic opportunity to market new crop corn and soybeans.  The momentum at the moment is to the upside and it is a good idea to wait until there are signs that this rally has run its course, but with normal weather and the potential for a strong dollar there is significant risk to the downside this year.

With a hot and dry weekend on tap it is likely that the corn and soybeans will stay strong until the rain hits the ground, but keep in mind we have a USDA WASDE report on Tuesday and we will be taking a close look at the Monday afternoon crop progress report to see if there was any stress on crops from the hot temps.  So a very busy early next week will go a long way in determining market direction.

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

See December Corn Daily chart:

See November Soybeans Daily chart:

 

This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line.  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

Was That a Bear Trap in December Corn Today?

Jun 05, 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.   

 

Was That a Bear Trap in December Corn Today?

Ted Seifried (312) 277-0113 or tseifried@zaner.com

After breaking out above yesterdays high, new crop December corn broke support at yesterdays low and fell 16 cents to 507 3/4 today.  This is an outside reversal down day and we even closed below support at Fridays recent low of 508 1/4.  By traditional standards this is a sell signal, and a rather strong one at that.  It is important to note however, we saw a similar situation last Friday when we also had a sell signal coming from an outside down day but corn failed to follow through to the downside in the next session.  This was because of a hotter drier forecast on Monday.

The timing of this comes as a bit of a surprise for me as weather still seems to be a concern.  We are looking at the potential for hot temps (upwards of 90 in many areas) during the Saturday, Sunday, Monday time frame.  Many areas have not had substantial rains for over a week and the next forecast for precip is not until next Tuesday.  Now, I am not a meteorologist, but my experience with rain events after a ridging pattern is that the coverage and totals can end up being disappointing.  And my private forecasts got hotter and drier late in the day.

So, even though we did get a solid sell signal from a technical perspective, I am a little reluctant to get short after todays activity.  That being said, it would be easier if December corn were 10 cents higher because we really want to protect that $5.00 level and make sure that we get more of the new crop production hedged before we slip below it.  In the end this could be a bear trap that catches the technical traders off gaurd, but it needs to be watched closely.

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

See December Corn Daily chart:

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

This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line.  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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