for myself, I have actually switched back to trading outright Nov beans exclusively as opposed to the spreads...won't be back in those until fall likely, as the major moves in old/new have happened. Also doing some light meal/oil spreading, and I expect to do a little crushing within the next few weeks.
grain spreaders
- Thread starter youngtrader
- Start date
Interesting. I'd like to get into oil v meal but have to watch it and study up first...
Are the new crop calendar spreads usually pretty tame? Exhibit real seasonality or just follow the front month of new crop?
Could Nov - Jan beans fall to maybe -15 or so? Any words of wisdom on that spread and what might govern it?
Are the new crop calendar spreads usually pretty tame? Exhibit real seasonality or just follow the front month of new crop?
Could Nov - Jan beans fall to maybe -15 or so? Any words of wisdom on that spread and what might govern it?
Hello, spread traders!
This is my first post on this board and i'd like to make it at least not useless =)
Currently i'm learning to trade spreads and some questions have already come to my head.
I would like to express some hypothesises and ask if they are right or not.
As far as i understand, spreads begin moving in about one year or even earlier before the expiration date of the contract. Let's take the soybeans as an example. Do i understand correctly, that if we are going to trade n/x spread in 2010 we should better enter the position in the Decembr 2009 when the spread is at zero levels or even at negative carry? Or should we wait till the market shows its current balance of supply and demand?
Let's say, we have entered the position in December and in January or February we suddenly (?) see that the market is inverting and all those spreads don't work. Should we wait till that confirmation or can we just base on the seasonal statistics and enter the positions in advance?
And the second question i'm thinking about and can't decide is diversifying the trade risk into different months spread. For example, we can enter the position with 6 contracts of n/x beans or we can mix the months like
buy 2 H0
buy 2 F0
buy 2 N0
sell 2 Q0
sell 2 U0
sell 2 X0
Would such a mixed bean soup work? Is it a good practice or professional traders usually don't do that?
Thank you for any commentaries and replies.
This is my first post on this board and i'd like to make it at least not useless =)
Currently i'm learning to trade spreads and some questions have already come to my head.
I would like to express some hypothesises and ask if they are right or not.
As far as i understand, spreads begin moving in about one year or even earlier before the expiration date of the contract. Let's take the soybeans as an example. Do i understand correctly, that if we are going to trade n/x spread in 2010 we should better enter the position in the Decembr 2009 when the spread is at zero levels or even at negative carry? Or should we wait till the market shows its current balance of supply and demand?
Let's say, we have entered the position in December and in January or February we suddenly (?) see that the market is inverting and all those spreads don't work. Should we wait till that confirmation or can we just base on the seasonal statistics and enter the positions in advance?
And the second question i'm thinking about and can't decide is diversifying the trade risk into different months spread. For example, we can enter the position with 6 contracts of n/x beans or we can mix the months like
buy 2 H0
buy 2 F0
buy 2 N0
sell 2 Q0
sell 2 U0
sell 2 X0
Would such a mixed bean soup work? Is it a good practice or professional traders usually don't do that?
Thank you for any commentaries and replies.
I can't speak for bean spreads but it's certainly done a lot with eurodollar interest rate futures.
Speaking of eurodollars, looking at nov 10 beans (after the recommend to try x9/x0) made me think it's almost like trading an interest rate, the thing is so far out. Nov 10, there can't be any info on the crop itself, right, so is it all econ expectations?
Sunspot expectations maybe?
Speaking of eurodollars, looking at nov 10 beans (after the recommend to try x9/x0) made me think it's almost like trading an interest rate, the thing is so far out. Nov 10, there can't be any info on the crop itself, right, so is it all econ expectations?
Sunspot expectations maybe?
alright, for your first question that is more something that you have to answer for yourself. Sorry to be so obtuse but when/how you position and trade is your "edge" in the ag markets. For instance, I trade the whole curve out to May 2011 if anyone wants a trade same with corn. In the bean markets especially % of full carry doesn't mean jack to the markets now given the supply demand curve....for instance we're at -1070% in the Q9U9 spread as of 7:36 PM.
In your example, you can hedge that way but you should compute the correlations/volatilities when going across crop years as they tend to break down faster than same crop year. Most professional spreaders mix months all the time to reduce portfolio risk; I do it all the time too!
In your example, you can hedge that way but you should compute the correlations/volatilities when going across crop years as they tend to break down faster than same crop year. Most professional spreaders mix months all the time to reduce portfolio risk; I do it all the time too!