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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

Hedging 2013 Corn and Trade Ideas for 1/2/13

Jan 03, 2013

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Are you tired of listening to the same BULL ****, and services that do not have a plan if the market goes down instead? Hedge means to take risk off the table, and my service has all producers 100% hedged and they do have most of the upside unhedged (if we can rally for whatever reason). Hedge with a Pro and option expert who has been trading grains for 36 years.

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This report was sent to subscribers on 12/31/12 3:30 p.m. Chicago time to be used for trading on 1/2/12.

March 2013 Corn

After the close recap on 1/2/13: My resistance was 7.09 3/4, .02 1/2 from the actual high, and my support was 6.87 1/2, .00 1/4 from the actual low.

December 2013 Corn

After the close recap on 1/2/13: My resistance was 6.08 3/4, .03 3/4 from the actual high, and my support was 5.88 3/4, .00 1/2 from the actual low.

March 2013 Corn

7.23
7.09 ¾
-----------6.99 ½ Pivot
6.89 ¼
6.87 ½
6.82 ¼ FG 6.82 ½ is the 200 DMA

5 day chart.... Down from last week same day
Daily chart ... Down
Weekly chart ... Sideways
Monthly chart .... Sideways 6.82 ½ is the 200 DMA
ATR 11 ½ Oversold 32%


For 1/2/13: I continue to say "The gap bracket line at $7.08 ¼ is now resistance and then the daily numbers. Gap at $6.82 ¼ is support".

In my daily March 2013 corn numbers on Monday my resistance was .02 ¾ from the actual high; my support was .01 ¾ from the actual low.

December 2013 Corn

6.17 ¼ Use the same numbers as used on 12/31/12
6.08 ¾
-----------5.99 ½ Pivot near 200 DMA
5.90
5.86 ¾ FG


5 day chart.... Down from last week same day
Daily chart ... Down
Weekly chart ... Sideways
Monthly chart ...Sideways 5.97 ½ is the 200 DMA
ATR 8 ½ Oversold 17%


For 1/2/13: Daily numbers and then the downtrend line at $7.28 is major resistance; the daily numbers support.


The 200 DMA is pivotal not only for the day, but the direction for long term trades too.

In my daily December 2013 corn numbers on Monday my pivot acted as resistance and was .01 ¾ (only .01 ¼ in open outcry) from the actual high, my pivot also acted as support and was .03 ¾ from the actual low.

1/2/13:

Grains: March corn has held supports the last 3 days, not threatening the major support just $.07 below. I have been recommending playing the long side from here, and you know why by looking at the charts. I believe we will be much lower than here in time, but 'in time' is not the here and now, and why should you as a trader or hedger "tie your hands" to a long term position when you can do things to improve your position when at a key or major support or resistance level. Cliff and the funds know what to expect the first 3 days of the new year, and everyone will be looking to "place their bets" on the report that is due out next week. That is the game at hand. No senses to look beyond there, we already know the price parameters above and below the current levels.

I have been bearish for months and do look for much lower prices in time, but the question all producers must face is, "do I have enough protection going into the January Final report". We know that protection down $6.80 was enough protection so far, and $7 is exactly enough (if this was the March option expiration day), so if we can rally before the report I would use that as an opportunity to extend down to at least $6.80 or lower. There is no doubt that this report can cause a limit up or down move, and I have no idea what it will say, but I do know what I want to do, get more protection if it can rally, and get more upside if we are near supports.

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Instead of trying to get long if the market goes higher, my producers way of being long right here, is where their protection ends, all at $7 and at $6.80 and not buying more protection. Same goes for soybeans wherever your protection runs out. I recommend some more protection before the report. If you are bullish get some upside too, even if it means just to buy some calls back. Limit up or limit down, it is your risk, your reward, your decision. Make sure you adjust to a reasonable risk.

Buying more protection for March soybean hedges is the prudent thing to do when the January contract is below $14.21. There is not too much to think about, soybeans are vulnerable and unless hedged you are long. March $14.90/$14.40 put spreads should be kept because it is $.15 from full intrinsic value. Producers should buy more protection down to a major support level such as $13.70, $13.40, or $13.20 before the report.

I want to trade the numbers without bias today and risk $.04 in corn and $.06 in soybeans using a stop to protect any idea.

12/31/12: Grains: I have wanted to buy March corn for a few days since we are so close to major support at the gap of $6.82 ¼ which is now also the 200 DMA and why it makes it a very strong support. I would be surprised if it was filled before the report, and why I think we can correct a little more to the upside on Monday, and if the funds are in a buying mood to start the new year, more upside this week. But if they want to further liquidate, then the gap will be tested before the report. I do not make the market, I participate in it. The cliff is the primary driver the funds and all participants must respect because it will affect your market, and override each markets own fundamentals. This week is not your average week, there is very light volume and it does not take much to move the market, yet it is not moving as witnessed by my using the same numbers for the last 3 days in a row.

All I can go on is the chart, and the chart posted a higher low than the week before, and has good resistance at the bracket line at $7.08 ¼ which is great place to take profits if long, or a place to go short or buy more put protection. If the market can close below $6.80, I would look for much more downside to follow.

January soybeans are in a similar situation with last week's low holding above the previous weeks low. The downtrend line resistance at $14.70 and support at the recent low at $13.72 ¼, the pivot becomes $14.21 right where we are now. That is why I only look for $.50 up or down from here going into the report. Above $14.21 I prefer the long side, below it the downside. $14.90/$14.40 put spread is too much from its intrinsic value to exit now. I would take the opportunity to extend my put protection on a rally, and our way to be long is by not extending the puts here. It is never wrong to get more put protection when we are here in the middle of the parameters, but now it comes down to how bullish or bearish you are. Above $14.21 should encourage you to try and buy it cheaper, below there you should be more aggressive.

12/21/12:

Grains: Never too late to hedge 2013 if you are not already 100% hedged as I have recommened since July. I remind you every few months that markets can and will do anything. In 2008 the new "all time highs" in soybeans and corn were followed by quite a sell in a short period of time, and then the economic meltdown affected the grain market severely with soybeans going down to $7.90 and corn to $2.90 by harvest time (4 months from the high). The grain markets are very volatile the last few years and made for traders like me, who have risk parameters on every idea, and try to take what the market gives them when the odds are in their favor.

12/20/12:

Grains: Hedging 2013 crops is a must for any producer as I have insisted for months now. Having about $.50 of the first $.60 down is a comforting thought and financially sound approach, as you pursue higher prices. My strategy does just that. Listen, I was a floor trader, and my income was if I made more money than I lost. Fundamentals do not put money in my account, buying for less than I sell it for, or selling for more than I buy it back for, is the only thing that made me money. Fundamentals can be helpful, but the more unknowns there are, the less they become relevant. Farmers or speculators make money from farming or other professions, but I made money from trading. Before they had my service they looked at it like the majority of farmers or speculators do, they have an opinion what the market will do in the future and are willing to gamble on it. Many had no relevance for price discovery not even looking at a chart, but are willing to hold a position based on "what if" fundamentals, and have no control in controlling risk, or possible losses versus expected gains. Since I have seen 99 out of 100 new members fail in trying to stay on the trading floor for even a year let alone longer, what makes a farmer, speculator, and a big percent of the funds think they can do better? Trading is like being a "starter" in the NBA, NFL, or MLB, and if you want to stick around and do this professionally, then you must continue to improve until you are "competitive" (making money consistently such as monthly or quarterly) to be able to play the game at this level. When you can do that, unlike sports you can do this forever.

Some people fly first class to the super bowl and sit on the 50 yard line, and stay in a fine hotel and "party on the town", and come home $25,000 poorer. Some like to go to Vegas and their wife let's them lose $25,000 playing casino games, and some like to gamble playing the game of "stocks, bonds, or commodities", some real estate, or the many gambles that people call business, so losing money trading commodities is no different than playing casino games. How you enjoy to gamble is up to you, and I am not here saying it is wrong to lose money if you have it to lose, and is insignificant so that it does not affect your lifestyle. I only knew 2 people in my life that actually could beat the horses by handicapping only. I owned race horses and raced in Chicago year round continuously for 10 straight years, so I have seen my share of Damon Runyon characters, and only 2 were consistent monthly, quarterly, in the majority of years. If I can help you think (mindset and approach) and trade better, and improve whatever you were doing before, then I am happy to have done so. I know that if you are losing less this year than last year, it is good to see the improvement.

Over the years I have seen my producers really take advantage of my wisdom and knowledge, and have wasted no time this year putting it to use (old crop and new crop too). Some other services I hear right now are just starting to hedge 2013 a little, and they seem content to gamble with producers money, maybe because they do not know enough about options to use them correctly (not many do) or like farmers, they make money not from the ability to actually predict future outcomes, or be able to trade and control risk resulting from being wrong their ideas. Producers are common to think that "risk" is a part of farming, but unlike crop production or costs, current prices and my strategy that allows some protection to the downside, and the right to make more money if the market can go up is a game changer for ALL my producers. Much less stress, and the ability to be self directed, is priceless! They now can use a chart to see price levels they can use, that in the past are factually support or resistance, instead of being random about price.

Want to know what I think for tomorrow and going forward?

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Howard Tyllas

Put yourself in a position to make money, use the daily numbers service!

Email: dailynumbers@futuresflight.com
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Tel.1-312-823-9189,1-702-405-7245

Disclaimer: No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.

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