Seasonal spreads

Here's the scorecard as October has come to an end:

4 open losers, with CL bringing the most red ink. Seems like Crude Oil heading towards 100 is making this an off year in energies. Unfortunately the Sep 08 contract has absolutely no electronic action.

Other than that, I haven't given up on Soybean Meal yet - it still looks like it can make a run for it.

 
hrokling,

Thanks for maintaining this journal. I enjoy reading it and I am learning from it.

An observation on your Meal spread.

I have been trading since the seventies and there used to be a theme in meal spreads, kind of a limited risk setup, buying Dec/Jan and Jan/March at a discount because sometimes there are transportation problems on the Mississisipi starting in December due to inclement weather and the spreads tighten or go to premium even if only for a few days. We'll see how this is going to develop this year.

I am not familiar with the latest delivery points or procedures. It would be great if someone in the grain business could comment on the latest procedures.

Regards,

GC
 
Thanks for that, gurucanditate. I'd also be very interested to hear more about the procedures in the grain business.

Today (premarket) I've added another contract in the Jul 08/Mar 08 Wheat spread, this time at -129. This makes the average -140 1/2.

So for the record here's the position:

Long 2 Jul 08, Short 2 Mar 08 ZW Wheat @ -140 1/2
 
Today I closed the spread in Soybean Meal - and the timing was good: As I suspected the grains and soybeans would sell off after being up in the overnight session.

Sold 4 Dec 07, Bought 4 Jul 08 ZM Soybean Meal @ -2.20 - CLOSED - PROFIT of 2.675 which is 535 usd.

I'm glad I chose to hold this spread a few days longer than my initial plan - it looked like it was ready to take off in the chart. Unfortunately the entry wasn't very good, so the performance was mediocre but at least profitable.

Other than that, a few comments on the other open spreads:

Let's start with the Crude Oil spread. Unless the much talked about in the media 125 calls goes in the money I'm struggling to see how much more downside I can have temporarily. Yes, the USD pushes the price up - but if the market corrects oil should theoretically correct also. I'm holding for now, stoploss has been blown through of course, but there's hardly ever any bid for the Sep 08 contract on Globex.

Natural Gas. Who would have though just middle of last week? As Oil soared the spread which looked very promising for such a long time actually dipped into a loss. And now the spread has taken off and is almost at my profit target. Wow!

I was very foolish when adding to the Wheat spread, being newbie suckered by the overnight action only to see the spread drop 10 points in the floor session. It's come back nicely now and shows a nice profit. I have a target of -80, and plenty of time.

Other than that I'd just like to add that I've been doing a few spreads in currencies and meats this fall, and I've changed my opinion about seasonality in currencies. I'm now a believer although I have a lot more to research. Meats also has great potential and I'm currently short Feb 08 / long Apr 08 Lean Hogs towards Christmas. Just mentioning it, because I think it's very promising - but it's not part of my trading plan so I won't be updating on it.

Good luck with your spreads, and happy trading!
 
hrokling,
Why target only -80 for the ZWJul/Mar spread, for the last 5 years is closed about even money or above? I have a large position on it and intend to hold it at least till the end of the year, I was lucky to enter it way before the recommended date at an average of -166.

Are you considering ZCMar/ZWMar? I entered it yesterday at -418 and plan to add to it - I think it has even more potential than the above.

I took a beating on Crude and Heating Oil but made up for it in the Hogs spread.

Currencies also have turned up for me very profitable so far.

Lucky trading
 
Hello kahai,

Hope things are going well.

The -80 profit target for the Jul/Mar spread is calculated based on historical performance along the procedure I described a couple of months ago, with a little extra added since Wheat has been so volatile this season. Congratulations on your large position!

It's funny; I also entered into the same Corn/Wheat spread yesterday at -419! I've been following it since around -520, but misread it back then. I think it has great potential as well, but am surprised you think it's got better potential than the Wheat spread.

I'm loving the hog spread I'm in now, and am looking for it to move up to at least 10.
 
Hi hrokling,

Everything is fine here, hope the same with you.

I was tempted to enter the HE Apr/HE Feb too, in fact today was the entry date, but I stayed away because at about 6 it is close to its historical high, only in 2002 and 1998 did it go substantial above that and then only to 7. Of course the market always surprises us. If there is a substantial pull back I will consider it.

Best to your trading.
 
hrokling,
I forgot to mention why I think the ZC/ZW spread has more potential. When I look at the weekly charts of the last 5 years, the distance for this spread from the current price to the average closing price on Jan.28 is approximately 310 points. When I do the same thing for the ZW Jul/ZW Mar (Dec 12) the distance is only about 100.

Any thoughts?
 
Managed to get a somewhat decent fill to exit the crude oil spread, as the price dropped more than three dollars.

Sold 2 Sep 08, Bought 2 Mar 08 CL Crude Oil @ -3.5 - CLOSED - LOSS 1.25 which is 2.500.
 
Your comment on Lean Hogs got me checking out the history, and yes you're right it's hardly ever gone further than seven. It's strange, because I've seen a MRCI chart that's up to date projecting it to go much higher. Anyway, I actually got out of it today anyway and booked a nice profit.

No particular comments on Mar 08 ZC/ZW or Jul 08/Mar 08 ZW at the moment. But they moved the right way today :)
 
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