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.
Tight Stocks in Grains Take Center Stage in Delivery Period
Feb 28, 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 strong first notice day highlights the tight stocks in old crop corn and soybeans. There were zero corn, soybean or soybean meal deliveries this morning. It seems that there could be commercials looking to source grain off the board. On top of that corn and soybeans saw higher then expected export sales numbers adding to the bullish tone this morning.
Strong cash basis, good export sales and tight old crop stocks could have end users turning to the CBOT futures to get some of the grain they need. Today was first notice day for the March contracts and there were no reported deliveries. Once a futures contract is in a delivery period long positions can be delivered on beginning on first notice day. When there are no deliveries, as we saw today, markets will sometimes continue to rally until deliveries are made. Right now this may be the case.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
Export sales numbers were also strong suggesting that last week's fear of South America being slow to move into position to export might be having more of an effect on buyers. If this continues there will be growing concerns over already tight US grain stocks.
At this point I think grains are due for a bounce. If you have followed anything I have written in the last 5-6 months you probably know that I have been bearish since August - September. And, longer term I am still looking for lower prices, but I do think that we could have a healthy bounce from here. At the very least I am advising clients to wait to add to hedges for the moment. If the December corn makes new lows for the year I think we will have to get more aggressive, but in the mean time I would like to see if Dec corn can bounce 15-35 cents to sell better. Stay tuned.
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March Corn Daily chart:
March Soybeans Daily chart:
March 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 $7.00 and soybeans near $14.00. 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