Seasonal spreads
- Thread starter hrokling
- Start date
Hi Rosy2:
Your spread CLU7 - CLV7 was directionless for the first 2 hours of this morning. It closed out strong confirming a bullish trend instead of a bearish one previously suspected. It's a good spread and I think the bullishness will continue. Just watch your stop and take a quick profit if there is a sudden and severe reversal.
Hi Kahai:
HOX7 - HOG8 is the Spread you should be trading now and not HOZ7 - HOK8. At this time, the first is a better Spread and with more volume. Furthermore, the trend for the first is more defined than that of the latter.
What you mentioned about hunting stops happens in Forex which is actually a Spread of currency pairs. Hence, it is also possible in Electronic Commodity Spreads. My strategic trading methodology does not give room for brokers to do this.
The reason for using stops is to protect you from being wiped out. By placing a stop, you have decided on how much you are ready to lose before getting out of the market. Hence, it's your call. My 200 pt. stop limit is a suggestion. If you can handle 300 pt., that's you call. The question is what are you trying to do? There are so many markets. Why sit on one you are not making money?
I took a bath on that wheat spread as well, but I'm putting in down to a lesson in why you need to understand the underlying dynamics of a market, and not just look at dates on a calendar.
In a normal year, when supply and demand are more or less in balance, the may-sep spread will steadily build in carrying charges as a way to cover the cost of storage through the year. But in the case of a severe shortage, buyers want wheat as soon as they can get it, to make sure they can get the supplies they need before it runs out. Nobody is worried about storage until next May. If you look at the spread charts on Scarrtrading.com for the past 20 years, you can clearly see it: when wheat spikes up, the spread goes in the toilet.
The good news, though, is why I'm falling in love with physical commodities, especially spreads: all this stuff is public, and easy to learn about, and responds to the laws of supply and demand. It's not like stocks, which go up and down for god knows what reason...
In a normal year, when supply and demand are more or less in balance, the may-sep spread will steadily build in carrying charges as a way to cover the cost of storage through the year. But in the case of a severe shortage, buyers want wheat as soon as they can get it, to make sure they can get the supplies they need before it runs out. Nobody is worried about storage until next May. If you look at the spread charts on Scarrtrading.com for the past 20 years, you can clearly see it: when wheat spikes up, the spread goes in the toilet.
The good news, though, is why I'm falling in love with physical commodities, especially spreads: all this stuff is public, and easy to learn about, and responds to the laws of supply and demand. It's not like stocks, which go up and down for god knows what reason...
Here's an overview of closed and open positions at the end of the month:
I've used the closing prices from the exchanges, but with regards to the open spread in wheats - it's just not realistic. I don't know why it settled like that, it should have been around -7 instead of -4 so there's an extra open loss of 750 usd at least.
And regarding that spread: Yes it's violently hammered through my stoploss! It was very volatile at the end of last week, I at one point saw it around -14. I will try to scale out of it in the coming weeks when there's some strength.
I've used the closing prices from the exchanges, but with regards to the open spread in wheats - it's just not realistic. I don't know why it settled like that, it should have been around -7 instead of -4 so there's an extra open loss of 750 usd at least.
And regarding that spread: Yes it's violently hammered through my stoploss! It was very volatile at the end of last week, I at one point saw it around -14. I will try to scale out of it in the coming weeks when there's some strength.
I was just commenting on kahais question with regards to differences between Scarrtrading.com and MRCI - when history repeats itself (as it eventually does) it's of course with a twist. The timing and size of moves are different, and sometimes all the spreaders are caught the wrong way as with wheat now.
You may be right about this (I haven't looked at it since I've been very busy with the volatility in the equities market lately).
The spreads I'm trading on this thread are all from the MRCI encyclopedia, and I don't have a problem recommending this book to people following this thread or interested in spreads in general. The patterns are however about 2 years old now, so things might look a bit different if you create updated charts (as witnessed with the discussion of differences a few pages back).