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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 Corn and Trade Ideas for 6/18/13

Jun 19, 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 6/17/13 3:45 p.m. Chicago time to be used for trading on 6/18/13.

July 2013 Corn

After the close recap on 6/18/13: My resistance was 6.76 FG, .01 1/4 from the actual high, and my support was 6.60, .02 1/2 from the actual low.

December 2013 Corn

After the close recap on 6/18/13: My resistance was 5.51 1/4, .00 1/4 from the actual high, and my pivot acted as support and was 5.38 1/4, .02 1/4 from the actual low.

All charts and numbers for 6/19/13 have already been sent to subscribers at 2:05 pm.

 July 2013 Corn
           
6.85                          Key Downtrend Line Resistance          
6.76 FG           
-------------6.68        Pivotal Uptrend Line                                   
6.60                         
6.51 ½                         
                       
5 day chart....     Up from last week same day  
Daily chart ...     Sideways 
Weekly chart...  Down  
Monthly chart...Sideways              7.00 is the 200 DMA
ATR 15 ½                                            Overbought 83%

 

For 6/18/13: The uptrend line is support, bracket line is pivotal, and the downtrend line at $6.85 resists.                

In my daily July corn numbers on Monday my resistance was .04 from the actual high; my pivot acted as support and was .01 ¾ (only .00 ½ in open outcry) from the actual low.             

December 2013 Corn 

                                                            
5.51 ¼                                                           
5.46 ¾                                                      
------------5.38 ¼        Pivot                                                
5.29 ½                                                                  
5.25 ½                                                                  
                         
5 day chart....      Down from last week same day                                                                
Daily chart   ...    Sideways                            
Weekly chart ...  Down                     
Monthly chart ...Sideways         5.88 is the 200 DMA
ATR 13 ¼                                         Balanced 37%
     

For 6/18/13: I still say "Bracket line at $5.47 is resistance, daily numbers and then the 2013 low is major support".   
New low for the run and closed higher bodes well for another up day to follow on Tuesday.

In my daily December 2013 corn numbers on Monday my resistance was .02 ½ from the actual high; my support was .00 ¼ from the actual low.                  
                                                       
2013 low is $5.12, 2012 low was $5.11 FG, 2011 low was $5.10, and 2010 it was $4.         
   
6/18/13:

Grains: When you plant you do so because with all things known, it was the right thing to do. You might need to replant if conditions warrant, and you do so when at the time it looks best to do so, you replant. You cannot say you should not have planted the first time because you will never know what Mother Nature (or the market) will do, so you follow your gut with all things known and unknown on when to plant. You know the reasons for what you do, and it is not because the farmers 50 miles away are planting, it's because it is time on YOUR farm to do so. You are in control of what you do, and you will look at what your neighbors are doing, but you do what your thoughts and opinion on when to plant to get the best results. This is the same thing when it comes to trading or hedging, the same concept of doing what is right for YOU based upon YOUR thoughts and ideas at the time you do something, and just like planting, if it is not right then why are you doing it. You will never know what the weather will be the next 3 months, so you will never know if buying back upside or buying more downside protection until the race is over in 3 months (or maybe sooner) was the "right" thing to do. I have taught you (both trader and hedger) to know what you are doing and why, and do not risk too much on any idea.

I have been talking much about mindset lately because fundamentals are not much help, and at this stage of the game you better have an open mind, one that thinks based on charts and probabilities with clear risk/reward defined, and an approach that never makes you emotional. Mindset and control of what you are doing and why, is much better to write about than more projections from both bulls and bears and their talking points.  

I continue to say "I prefer to take the sell signals but I would trade the numbers without bias and risk $.03 ½ in corn and $.06 in soybeans and use a stop to protect any idea".           


6/17/13:

Grains: Both old and new crop corn and soybeans closed lower on the week, but old crops lost less than the new, and that should continue. Old and new crop corn left a gap from last Friday, so corn was underwater (no pun intended) for most of the week. Those gaps are the first objective if you were long.

Unknowns are a 50/50 chance, and the unknowns can change as we have seen from too dry to too wet conditions, and nothing stopping it from getting too dry again. Right now we are getting rains and that is not a bad thing, especially when you are in most areas right now where timely rains are welcome. After the close today will be the weekly crop progress report and that should help in the direction for a few days.

I was happy to see my producers take advantage of the rally once again by selling 2014 corn and soybeans call spreads, the last 2 weeks when at bracket line resistance. If you have a problem selling 2014 crops, or sold already and want to take advantage when at supports, buy back some of the 2013 call spreads. If I sell 2014 for $.30 and worried about a rally, I would buy some 2013 call spreads for $.05 or less (sold for $.20 or more), and that should take care of any rally in the next 2 months. Lots of ways to use options, but you must have a conviction on the idea to know exactly what options exactly reflect your idea.

By now, in December corn you should have protection down to at least $5.10; and at least $.30 upside just above the puts you are long. Of course if it rallies above the call spread sold, you have unlimited upside too. The downside is the only thing that can hurt you if you run out of protection, but the upside never hurts. Most have protection in November soybeans down to $11.40, but some only to $12 and I would extend down my puts to $11.40 at this time, and sell some upside I have to pay for it. Everyone bought back and took profit at least $1 of the call spreads sold, so this week would be a good time to sell the upside back taking a profit. Not only is the call spread much more, the put spread is much cheaper.    

Nobody can know the unknowns, so you place your "what if" bets based on risk reward, and if you wanted to buy call spreads cheap you are getting another chance now before the report. You had another chance to sell the resistance the last 3 weeks. I understand what you feel because I am human too, but when the market looks like it is going to break out to the upside but are at a significant resistance, it is the best time to sell and if it does go higher you risked little, but since it is at a resistance if it does hold, the rewards are nice. That is also true at supports, when it looks like the market is going to flush like a toilet but is just above a significant support, that is the time I buy risking little to see if it holds and rewards nicely when it does. Rallies produce opportunities at resistance, breaks provide opportunities at support. You have been reading the same thing from me for years, and now you have seen for yourself and are taking advantage of what you have learned and seen, and that is where your knowledge is tested and implemented and becomes wisdom.

I have done everything over the years to educate you to the pitfalls of trading, and the same things apply to hedging. I told you it is impossible to know what 95+ million acres will produce especially when it is not pollinating yet. Services, brokers, and analysts do their best to explain the what if's and that is very helpful to understand the possibilities, and the charts tell you what to reasonably expect a rally or downtrend to end, but that is where the help stops and the problems begin. The problem for you is that what they say no matter bull or bear, they are giving you an educated GUESS, and I am telling you to guess for yourself if a guess is what you want to follow. Using my service I have taught you there is no need to guess, we take trades or improve hedges for a reason, it is at a chart level to risk little and rewards nicely. You have learned you need not be "all or nothing" unless you have a conviction, and I always try to keep my position where if I am wrong I can still make money because of the strategy used.

You have seen for yourself how easy it was to forecast the rally might end at the bracket lines; it did indeed get there, and did indeed go back down. You saw how easy it was to forecast the gap at $5.11 which was the low of the last 2 years, to be a solid support for this year too, and we forecasted that long ago when above $6. Everyone one way or another did improve their hedges when we were down there. I can see the improvement in everyone year after year. The longer you do this, the more improvement you should see. Follow your journal, and if you are doing what you think, and doing things at a chart level risking and going after a reward that is comfortable to you, you are in control of what you are doing. If you write one thing and do another, especially get emotional for whatever reason, you know exactly where you need improvement and the reason why will be in front of you, for not being able to follow what YOU think.

Remember, the chatter from these sources is what they do for a living, and the reason they do it is to be able to help you, and make money from doing so. But predicting the unpredictable is a fool's game, and maybe they are just another tree in the forest and cannot see above the logic in guesses. I have 40 years trading the grain market, and I have seen the reports over the years, and what I have taught you is to not try and get the fundamental right because you can still be wrong the market, but get the market right and could care less about getting the fundamentals right. Sports, stocks, opening a store, you can plan and think what you want before the game begins or the business starts, but as time goes on you must know what you are doing and why to stay in business or to win the game. There is a "halftime" going on continuously, and you must adjust to win or be successful, so it goes back to what I have always said, you will never know what the market will do, or your opponent in sports, or what the people are buying in your store or not, but you better know what YOU are doing and WHY. Self directed is the only chance I think the 1 in 100 have to be successful in trading, and the only way for a producer to hedge which is based on price and charts and time, and relying on your own knowledge instead of listening to people who could not trade their way out of a paper bag.   

I am a bear since last September and have said for months to take advantage of the market swings, even when we went limit up from the Iowa snow (I will remember that gift forever), and another gift of the rain is not only ending the drought, but because nobody will be able to plant. You are getting another chance to buy upside cheaply before the report next week, and you should still look at selling 2014 corn and soybeans or adding to what you have hedged already, and if being hedged 2013 and 2014 is too much for you to secure, hedge 2014 and get some upside back for 2013. I look at it this way, if you are a producer and you hedge, you did not sell, you just got flat (not long, not short) but rather took some risk off the table and protected some income, and whatever upside you did not sell or put protection you did not buy, you are LONG. That would be ok if the charts were pointing higher, but they are not, they are sideways to lower. Historically we are at high prices. Bulls are betting on another crop shortfall, I would rather be bullish if demand was strong.

I continue to say "I prefer to take the sell signals but I would trade the numbers without bias and risk $.03 ½ in corn and $.06 in soybeans and use a stop to protect any idea".           

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

The markets covered daily are Soybeans, Corn, and S&P's.

My numbers usually are sent at least 12 hours (via your email) in advance of the next day open outcry session. Subscribers use them as best suited to their own needs and sometimes that involves the overnight trade.

 

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Howard Tyllas

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

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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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