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September 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.

Expectations for the USDA Grain Stocks Report

Sep 27, 2012

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 softened again today as the trade braces for the USDA Quarterly Grain Stocks report tomorrow AM.  Corn was down 8 1/2 cents to 716 1/4 and soybeans were down 2 1/4 to 1570 3/4.  The day started with strength in soybeans coming from news that china had bot 2 cargos of US beans, however the bullish china buying enthusiasm faded through the day as traders started to talk about China using current prices to cover immediate needs but waiting for South American beans for future purchases.

Tomorrow's Stocks Report is a bit of a wild card.  I can make a strong case for this report to come out on either side of expectations.  On one hand i think that the actual grain stocks could be well below trade estimates, which would be very bullish for grain prices.  On the other hand I have to acknowledge who this report is coming from and with the USDA aggressively cutting demand the last 3 Monthly reports I have to wonder if their grain stocks numbers will need to reflect that in order to justify their significant changes in demand.  I can not say and will never know if the USDA is giving us truly factual numbers or just giving us what they want us to see, but the fact remains that at the end of the day this is what we have to trade.

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

Overall, I can see the need for a technical bounce in grains.  We have momentum studies showing a extreme oversold condition in corn and soybeans (not so in wheat), and the sell off highs has extended to the lower limits of Bollinger bands.  A bounce back to support could be coming down the line soon.  However, I can not comfortably say that I would be waiting for a bounce to extend hedge protection because prices are good and it certainly is possible that the bounce doesn't happen until we are at much lower prices.  For now we have big downside targets in both corn and soybeans in the form of chart gaps that occurred over the 4th of July holiday.  For December corn the gap is between 685 and 676, for November soybeans the gap is 1493 to 1478.

For Cash Grain Bids Click Here

Here are the trade expectations for the September 1st 2012 USDA Quarterly Grain Stock report tomorrow:

* For corn the average trade guess is 1.128 billion bushels with a range of 887million to 1.261 billion compared to 1.128 billion last year.

* For soybeans the average trade guess is 131 million bushels with a range of 110 million to 152 million compared to 215 million last year.

* For wheat the average trade guess is 2.278 billion bushels with a range of 2.159 billion to 2.533 billion compared to 2.147 billion last year.

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 $7.00 and new crop soybeans above $15.00. 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=Seifried

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

Are Grains Setting Up for a Bounce?

Sep 25, 2012

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.   

Are corn, wheat and soybeans setting up for a technical bounce?  There has certainly been a lot of energy spent pushing grains off highs but it seems that pressure could be waning for the time being.  Overall the grains may very well still have some more downside potential, but the last 5 trade sessions are starting to hint that there may be some opportunity to sell some higher prices.

In the last 5 trading sessions we have tried to push corn down below 739 and soybeans below 1600 with some success, however every time support is broken grains come rallying back to close over the key numbers.  After trying and failing to do this 4 out of the last 5 sessions it may be time for the bears to give up the gun for now and let the bulls take the wheel and give it a shot.  If there is a bounce from here it is most likely to be sold.  Major resistance for corn comes in 30 cents higher at 773 and for soybeans major resistance lies 40 cents higher at 1655.  If we truly are in a fledgling bear market the bounce will not quite hit upside objectives as sellers will jump the gun to make sure they get good pricing.

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

Overall it is very possible that with early harvest this year harvest lows could also come early.  However, with harvest numbers widely coming in better then expected and demand destruction (according to the USDA) being more aggressive then anticipated it is certainly conceivable that grains could continue to slide through the November USDA report.  What happens in the winter months will be mostly determined by weather.  This year we will be watching weather straight through next growing season as South American weather will be very important in price determination and our own winter precipitation will be needed to improve drought depleted sub soil moisture levels.  Good precip in the states and a good growing season, possibly El Nino, in South America could put a major damper on our post harvest rally.

For Cash Grain Bids Click Here

With high volatility in a 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 $7.00 and new crop soybeans above $16.00. 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=Seifried

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

Soybeans Break Technical Support

Sep 20, 2012

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.   

After a corrective bounce yesterday grains were back under pressure again today with corn closing down 10 1/2 but holding support at Tuesday's lows while soybeans closed down 50 3/4 cents smashing through and closing below Tuesday's low.  With the bounce yesterday it seemed that the soybeans could recover and resume the bullish uptrend of the last few months but now that we have decidedly closed below key support at Tuesday's low the chart outlook is starting to turn.

Not only did the soybeans close below key support, but it was also an outside down day where we bested yesterday's high yet closed below yesterday's low, and in this case we closed below the previous 25 days lows.  This outside day is much like a key reversal however we did not set a new contract high.  Tuesday's low was significant because it had held trend line support which has now been broken with today's activity.  All in all we would be lying to ourselves if we said that we didn't see warning signs.  As I have mentioned in conversation, there have been 3 key reversals in this move.  It's also fairly obvious that the USDA is determined to keep ending stocks from falling to record lows.

For Cash Grain Bids Click Here

The soybean chart we see today paints a much different picture then what we saw last week.  It seems that harvest pressures, better yields and a better weather outlook for South America have taken its toll.  Overall the current USDA balance sheet does not justify soybeans over $18.00 in my opinion.  However, it is certainly tight enough to keep prices elevated.

In the short term the soybean chart is suggesting more downside potential.  It certainly would be the right time of year for it, but how cheep can soybeans get?  That will really depend on how successful South America is with their crop on record planted acres.  If they have a good El Nino year, which so far looks to be the case, then that could keep prices down through their harvest March - May.  However, going into our next growing season the re will be a lot of pressure on a good crop and with what could be depleted sub soil moisture levels and fear of another hot and dry year we could see soybeans back to test highs again.  And if South America falls short who knows how high beans can fly.  My current thinking is that it is best to be about 50% sold at current prices and use a cost efficient option strategy to protect the remaining bushels to allow for upside potential for when the bins are getting dry.  One of the many many jobs of a grain producer is to get the best price possible for your grain.

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

Or, maybe get a guy like me to help.  Either way, give em hell partner.

With high volatility in a 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 $7.00 and new crop soybeans above $16.00. 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=Seifried

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

Under Pressure

Sep 18, 2012

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 have been under pressure to start the week after a flurry of news last week.  QE3 it seems is old news this week and the bullish effect on commodities markets has been short lived for now.  Good rains and a good weather outlook for South America has taken center stage this week.  El Nino is expected by many to be in full effect this year which could translate into a bumper crop on record yields.  This triggered China's futures to be sharply lower coming into the week and Chicago followed.  Add to that some harvest pressure and fund liquidation and we find grains now well off their highs.

Ultimately I have to look at last weeks USDA report as being quite bearish, especially for corn, because lower yields did not translate to lower ending stocks.  The corn has to be of particular concern because with a 733 million bushel carryover the situation does not seem as dire as was once thought.  Yes, this is a tight balance sheet, but no where near the numbers that were being thrown around in the midst of the scorching summer heat.  In fact, back in March - May we were talking about a similarly tight balance sheet for old crop corn and trading mid $6.  The time of year could mean added pressure as spreads are not offering much incentive to store grain this year.

For Cash Grain Bids Click Here

Soybeans also have a tight balance sheet, but not record tight.  Yet, we have traded record high prices.  The key here is going to be the South America crop.  If they fair better then last year on what is predicted to be record acreage then we could be swimming in $14.00 SA soybeans by March.

With record high prices and tight but not record tight balance sheets it seems that there would need to be some outside factor contributing to high prices - Like in 2008 when funds were buying anything tangible because of strong inflation and a weak dollar.  Enter QE3...  Further easing to the tune of $40 billion a month certainly puts downward pressure on the US Dollar and creates inflationary pressures.  However, the US and global economies is certainly not booming like 5 years ago.  So QE3 could have a diminished effect, care of the law of diminishing returns.

It will take time to know if QE3 is successful or not, but for now the effect on grains was minimal.  Harvest pressures, South American weather and a more comfortable balance sheet may take center stage going forward.

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

With high volatility in a 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 $7.00 and new crop soybeans above $16.00. 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=Seifried

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

As the Dust Settles

Sep 13, 2012

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.   

There has certainly been no lack of news the last two days with the Monthly USDA report yesterday and the FED announcing Quantitative Easing round 3.  Both the USDA and the FED had some interesting things to say.  In particular the FED decision to move forward with QE3 at this time was a bit of a surprise to me as I firmly believe it causes more long term harm then good, and it did not seem it needed to be done right now with the US dollar off of its highs and equities markets doing well.  The logic just is not there for me, but then I guess that logic may not be the driving force of the Federal Reserve Open Market Committee.

The September USDA report brought us some small surprises.  The USDA made marginal reductions in corn and soybean yields moving even closer to the low ball private estimates we have seen.  The surprise came with the sharp reductions in demand for both corn and soybeans.  The USDA continues to make a statement that were are seeing strong demand destruction at high prices and suggesting that price rationing may be easier then the market had originally thought.  Soybeans were strong because the yield did come in lower while much of the trade was thinking that the USDA could raise the yield due to improved crop conditions.  The soybeans had sold off 96 cents from the highs expecting a bearish report and as it turned out the report was not as bearish as feared so we took about half of that back.  Ultimately I have to look at this report as being bearish, especially for corn, because lower yields did not translate to lower ending stocks.

The corn has to be of particular concern because with a 733 million bushel carryover the situation does not seem as dire as was once thought.  Yes, this is a tight balance sheet, but no where near the numbers that were being thrown around in the midst of the scorching summer heat.  In fact, back in March - May we were talking about a similarly tight balance sheet for old crop corn and trading mid $6.  The time of year could mean added pressure as spreads are not offering much incentive to store grain this year.

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

Soybeans also have a tight balance sheet, but not record tight.  Yet, we have traded record high prices.  The key here is going to be the South America crop.  If they fair better then last year on what is predicted to be record acreage then we could be swimming in $14.00 SA soybeans by March.

With record high prices and tight but not record tight balance sheets it seems that there would need to be some outside factor contributing to high prices - Like in 2008 when funds were buying anything tangible because of strong inflation and a weak dollar.  Enter QE3...  Further easing to the tune of $40 billion a month certainly puts downward pressure on the US Dollar and creates inflationary pressures.  However, the US and global economies is certainly not booming like 5 years ago.  So QE3 could have a diminished effect, care of the law of diminishing returns.

As I stated earlier, I do not see the merit in doing QE3 at this time.  Partially because I don't think it was needed at this time, but also because the intended results of QE have not been realized in rounds 1 and 2.  QE was intended to do 2 things: create jobs buy adding money to the money supply for banks to lend so companies could invest in capital goods or labor, and restore confidence in the US stock market.  QE has helped put pressure on the US dollar and therefore prodded the US stock markets higher mostly because people need to put money somewhere to keep up with inflation and a weak dollar.  But the main goal of creating jobs has never been realized anywhere near the intended amount.  So this round of QE may turn out to have very little effect on the economy or the markets.

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

It will take time to know if QE3 is successful or not, but for today the effect on grains was minimal with corn closing up 4 1/4 and beans up 1 1/2.  Harvest pressures and a more comfortable balance sheet may take center stage going forward.

With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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?rid=Seifried

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

Thoughts Before the September USDA Report

Sep 11, 2012

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.   

 

Tomorrow morning the USDA will weigh in with a fresh view on the grain situation.   I think it is rather unlikely that there is much change on this report.  Most of the private estimates on yield are coming back near the August USDA numbers with Informa suggesting that the final corn yield could be over 2 bushels an acre higher then the current USDA estimate.  Also, crop conditions have not declines since the August report and have improved in the case of soybeans.

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

Ultimately I see the USDA very small changes if any at all on this and maybe even the next report.  And, whatever changes they might make could be offsetting as far as carryover is concerned.  To me it seems likely that little will change on the USDA's balance sheet until the November harvest report.

If this is the case the market may take an unchanged report as a bearish report because there is a portion of the trade that is looking for the USDA to continue to lower yield and ending stocks numbers.  So, an unchanged report could get a bearish reaction as it does not offer any new wind for the bull sails.

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

With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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?rid=Seifried

 

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 Effect Will the Fed Decision Have on Grains?

Sep 06, 2012

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.   

To QE3 or not QE3?

Next Wednesday will certainly not be lacking of market moving news.  First up will be the Monthly USDA Supply/Demand and Crop Production report.  Obviously this will have the potential to move grains significantly, but I will focus on my expectations for the USDA report in my post next Tuesday.  Also next Wednesday we have a Federal Open Market Committee meeting.  Normally the FED decision has some influence on grains as it effects commodities as a whole but it is not usually a game changer.  This time I believe it has a much greater impact on grain pricing because the expectations on the FED this time are very high.

For much of the last month there has been a component of all commodities markets that has been adding support to prices.  This has been most evident in precious metals and energies but has not been limited solely to the two market sectors but rather blanketing physical commodities as a whole.  The expectation of many traders for the FED to go along with Europe on coordinated easing has been growing as we approach the September 12th FOMC.  The trade feels that the most likely way the FED can participate in coordinated easing would be a third round of quantitative easing or QE3.  As such it seems that the market has spent time and energy factoring in a high chance of the FED announcing QE3 on Wednesday.

If the Fed were to go forward with QE3 it would put significant pressure on the US dollar and in turn be supportive of commodities prices.  Gold and Silver would benefit the most as traders search for quality, but all commodities would see a benefit.  So, QE3 could serve as the bullish fodder needed to get grains to new highs.

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

The issue as I see it is that right now would seem like a rather unlikely time to move forward with QE3, at least from a logical perspective (and I sure know that the government is not always making decisions of the logical variety).  The first two rounds of QE were largely disappointing in their results.  QE2 in particular did very little of what it was intended to as the law of diminishing returns kicked in.  In the 2008 banking crisis QE1 did serve as a physiological band aid and eased some of the rampant fears of a complete collapse however, the tangible results were no where near what we had hoped.  As it turns out, QE does put inflationary pressure on the economy and pushes people to get back into the stock market out of necessity because the US dollar is getting weaker and stocks can gain value even if the fundamentals are no more bullish then the day before.  So, QE did help inflate the stock market and it did add money into the economy but the banks were and still are very reluctant to lend money for private or business investment so the intended effect of creating jobs was never really realized, or at least no where near the target.

Furthermore, I see QE3 as being the "last bullet" in the FED's arsenal.  And now that we know how QE3 effects the economy I don't see the need for it at this time.  It would serve us better to save this option in case we get another sharp break in the stock markets.  Right now the US dollar is off highs and stock indexes are strong so to me QE3 would just add inflationary pressures to our economy with little or no benefit.  In the end QE3 has the potential to be a very, vary bad thing and I believe that the FED knows this.  They also know that every time they talk about it they get a positive reaction from the market.  So, for now I believe the FED keeps QE3 in their pocket for a rainier day and says that they are still considering it, maybe they say they are looking at it with careful consideration to appease the global easing party.

If the FED goes through with QE3 I do think it is likely that it will send all grains to new highs.  However, if the FED chooses not to move forward with it at this time then it could mean a sharp rally in the US Dollar and a fair amount of pressure applied to commodities markets.  Also, I am estimating that the trade has factored in about a 65-70% chance that QE3 will be announced and if it is not then there are some long positions that were bot in front of this that will be quick to come out.

It is certainly possible that the USDA report is enough to outweigh whatever the FED has to say hours later, but it will take a big surprise from the USDA.  Either way, Wednesday should be interesting.

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

 

***Also interesting of note is that the November-May soybean spread narrowed by 30 cents in the last 3 days reeling in a wildly inverted market.  This inversion is common in a strong bull market but the narrowing could be bearish.  It could also simply be the market adding incentive to store soybeans rather then sell on harvest.  Either way I think the November-May soybean spread will continue to narrow and this is a great way to get short soybeans if you feel the need.  The great thing about it is that this spread could narrow quickly if the soybeans sell off because the November has the potential to sell off more then the May, but if today is any indication even on a rally the May might still gain on November to entice storage.  I will be looking to add to my position here if there is a small correction of the last week's sharp move.

 

With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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?rid=Seifried

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

Grains are Having a Hard Time Holding Gains

Sep 04, 2012

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.   

When I looked at the night session trade after a holiday weekend I thought I was seeing the making of another sharp rally day in the grains.  I saw soybeans up 30 and corn up 10 and wondered to myself if we would double those gains by the time the pit opened in the morning.  We had seen that scenario so many times in the last few months so why not?  By the time I had checked in this morning grains were trading well off their highs but gave it the old collage try again after the pit opened.  Corn rallied to new highs and soybeans got within 5 cents.  About an hour later the bullish enthusiasm faded and corn was doing everything it could to hold unchanged. 

This story is starkly different then months past.  Yes, soybeans made a new high today but then proceeded to close 20 cents off those highs.  Corn did manage to close higher on the day but also 10 cents off highs and yet another failure at $8.18 resistance.  The price action here seems to be weakening.  There needs to be some new bullish fodder to get this old bull to run.  This could come from lower yield estimates or maybe the FED will come in and announce QE3.  Either way, judging from current price action, we need something to keep this thing going.

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

Everyone mark your calendars for the 12th of September as it is going to be an interesting day for grains traders.  We have our monthly installment of the USDA's fun (some prefer to say funny) numbers.  And later that same day we have a FOMC decision.  This could set up for a wild day.  Normally the FOMC meetings have a marginal impact on grain prices but this one looks like it is turning into a big deal.  It seems that the guys who pay attention to these sorts of things are placing big bets on QE3 yes or QE3 no.  This puts the markets in a position where there will be a major reaction one way or another, just like the Sep 12th USDA Crop Production and Supply and Demand report.  One or both of these events on September 12th need to be bullish to keep the rally in grains going.  Much more of my thoughts on both of these in later posts...

Patience may be a virtue for now, but waiting to long could have its consequences as demand should not be as difficult to ration in a questionable global economy - as the USDA has been hinting toward by lowering demand more then expected on the last two monthly reports.

Knowing that the technical traders will be nervous longs, the possibility that we will have a vacuum of new bullish fodder over the next few weeks, and the potential for producers to hedge at what are currently great prices - I have to be concerned that when this mature bull turns it may be violent.

***Also interesting of note is that the November-May soybean spread narrowed by 22 cents today reeling in a wildly inverted market.  This inversion is common in a strong bull market but the narrowing could be bearish.  It could also simply be the market adding incentive to store soybeans rather then sell on harvest.  Either way I think the November-May soybean spread will continue to narrow and this is a great way to get short soybeans if you feel the need.  The great thing about it is that this spread could narrow quickly if the soybeans sell off because the November has the potential to sell off more then the May, but if today is any indication even on a rally the May might still gain on November to entice storage.  I will be looking to add to my position here if there is a small correction of today's sharp move.

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

With high volatility in a 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 $8.00 and new crop soybeans above $17.00. 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?rid=Seifried

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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