TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY 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.
Have you ever thought about buying a sports sedan? You know, something that has 4 doors but also something fun to drive? Maybe not, but there is a huge market out there for the American consumer. There are also lots of choices and most of them have extensive options lists. Take Audi, BMW, Mercedes Benz, and Cadillac for example. Their biggest sellers are usually 4 door luxury sports sedans or small SUVs. And, many of these vehicles use either a turbo charged 4 or 6 cylinder engine because they are powerful and efficient.
Now imagine that you have picked out your flavor of choice and you are sitting down at the table to discuss options. Leather seats? Sure. Upgraded audio with nav? Ok. Sunroof? Meh... Performance package? Ohh, tell me more about that! Many customers want to get that extra pep when they are looking at this class of cars. And, I think I have a way for car manufacturers to offer this extra performance for a reasonable price... E85.
Sign up for our Morning Ag Hedge newsletter! Sign up here: http://www.zaner.com/landing/ag_hedge_newsletter.asp
Full disclosure, I work as an agricultural hedge broker. I know a thing or two about corn, and I try to be an advocate for the American farmer. Specifically, I know how we use corn in the US and abroad. The whole food vs fuel argument is not lost on me, but we have shown in recent years that we are capable of producing more than enough corn to go around given good to normal weather. I also understand that when you increase the demand for a certain commodity prices can and likely will go higher. But, in the case of corn, prices are currently at or below most producers break even so more demand may be necessary for the American producer and availability of corn to survive longer term.
My knowledge of ethanol and it’s use as a performance enhancer comes from an entirely different source. I am (and have been since an early age) in love with cars. I love working on cars, understanding how they work, and most importantly I like making them faster without breaking the bank. A few years ago I had to go from a pure bread sports car toa 4-door sports sedan becauseof my growing family. Naturally, I set off to improve it. Better breaks, better suspension, better heat management, and of course more power. And, while I did a number of things to add power (intake, exhaust, better injection, bigger charger pulley) the hands down biggest performance gain for my buck was converting my non-flex fuel vehicle to accept e85.
The combination of anupgraded intake and the e85 conversion alone produces an almost 15% increase in power. For you gearheads out there you know that is a big increase. Now, results will very depending on the application but I have heard of gains of over 20%. To do this we had to change some gaskets and small things that interact directly with fuel, put a sensor in the fuel tank and re-map the CPU to adjust the fuel/air mixture depending on the percentage of ethanol being used. That’s right, it will adjust to any percentage of ethanol so I can put in 93 octane or e85 or half a tank of 93 octane in a tank of e85 when I cant find e85. It’s really, really easy.
The other concern everybody has with e85 is fuel economy. And, while I do see a slight decline it is not nearly as much as what most people with FFVs (flex fuel vehicles) report seeing because unlike the common FFV my car is running the optimal fuel/air mixture. Without getting into too much detail FFVs burn e85 like it is regular gas and it uses too much fuel and not enough air. This means that a good amount of e85 (and fuel economy) goes shooting out the tail pipe. With the optimal fuel/air mixture the fuel economy does not suffer as much as what most people have come to believe.
This brings me back to the luxury sport sedan market. These vehicles are almost all using forced induction (turbo or supercharger) which is an application that e85 thrives in.Also, almost all of these vehicles require super premium (93 octane) fuel. The saving advantage of a gallon of e85 vs 93 octane is huge, well over a dollar on average over the last 4 years.This has more than offset any loss in MPG that I have seen. And... Most importantly, more power.
So, I make my plea to the car makers domestic and abroad. And to the ethanol industry to lobby for it. And to the consumer to ask for it. Because there is a use for e85 out there, and it could be a great thing for everybody.
We have some complimentary 2016 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. (Shipping to the US only)You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.Follow me on twitter @thetedspread if you like.
JulyCorn Daily chart:
JulySoybeans Daily chart:
JulyWheat Dailychart:
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
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.
