Forums - Wheat Calendar Spread Fundamentals

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Posted by Here2learn on 07-06-12 12:49 AM:

Wheat Calendar Spread Fundamentals

What explanations can you off for the sept wheat contract out performing the March today? Is it a fundamental that I am not seeing, or is it simply that the Sept contract was pulled up with corn more than the latter months?

Insights much appreciated, thanks.

Here to learn

Posted by TheBlackHand on 07-06-12 05:20 PM:

Drought in corn. Wheat is a substitute. Soybeans also affected.

Posted by Here2learn on 07-06-12 06:52 PM:

Quote from TheBlackHand:

Drought in corn. Wheat is a substitute. Soybeans also affected.

Right... but why the descrepency in the spread? That's the question.

Posted by oldtime on 07-06-12 07:00 PM:

Quote from Here2learn:

Right... but why the descrepency in the spread? That's the question.

because they need the wheat now, when it rains they can buy the cheaper corn later.

Posted by TheBlackHand on 07-07-12 08:34 PM:

I dont get where the 'today' in your post comes from. Fundamentals arent really responsible for day by day activity if your asking about one particular day - unless shock news hits of course - which would cause a bigger move.

Looking at MRCI, I'd say one of 2 things:

1. The seasonal rally in u12-h13 has occurred 2.5 months early this year

2. The drought...

What do you think?

Posted by oldtime on 07-07-12 08:54 PM:

Quote from TheBlackHand:

I dont get where the 'today' in your post comes from. Fundamentals arent really responsible for day by day activity if your asking about one particular day - unless shock news hits of course - which would cause a bigger move.

Looking at MRCI, I'd say one of 2 things:

1. The seasonal rally in u12-h13 has occurred 2.5 months early this year

2. The drought...

What do you think?

there will be no drought, check the historical records, it almost always rains, and I will bet my life fortune on it!

oh wait, I already did that, that is why I had to get a job and am now just a little forex trader.

Posted by Here2learn on 07-08-12 12:27 AM:

Quote from TheBlackHand:

I dont get where the 'today' in your post comes from. Fundamentals arent really responsible for day by day activity if your asking about one particular day - unless shock news hits of course - which would cause a bigger move.

What do you think?

Yeah, that's my point exactly. Fundamentals should not have influenced the spread that much in a single day. There was a big move in the underlying, but unless something fundamental changed, the spread did not have a reason to sustain its move in the short term. It looked like an opportunity to fade the move. In retrospect, it was. I was looking for confirmation from others that I had not overlooked something.

I guess I should have traded it, but then again, it probably would have moved further the other way had the market actually seen me make a trade... It tends to look for my trades and purposely move against them!

Posted by TheBlackHand on 07-08-12 01:21 PM:

My guess is that it was simply a technical correction. Perhaps spread traders taking profits, or one leg getting out of synch with the other and it will revert. Perhaps an opportunity to buy more spreads?

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