What are the factors that cause a spread to move up or down? For example, I've been watching the spread between Dec09 Corn and May10 Corn and the spread has been around 19 for a week or so. What are the various events that would make that spread increase or decrease?
supply and demand when looking at the old vs new crops. Is a bird in the hand worth two in the bush? or do you have plenty of birds right now, and just need to worry about getting birds in the future? btw...if you are new, yes, trade the corn spreads *snooz*....but if you want to see movement, watch the bean spreads. Especially any spread involving H, N, or X.
Any opinions regarding the soymeal Q/U spread...it's trading at a huge inverse. Lots of fundamental reasons I can think of but seems the 26$ inversion is mind boggling....
The meal spreads have provided wonderful sells as of late especially in the deferred months. The near months are a touch to volatile for me personally though, good luck.
Yes...its just a factor of the crush and supply. Look at the crush...we've been seeing some EXCELLENT opportunity for crushers lately with these elevated meal prices. Meal was moving higher with the beans, etc etc...now that demand has been rationed, and crusher selling has come in, meal and meal/oil spreads should correct. The spreads however, should continue to stay inverse until harvest given the supply issues out there.
Would it be possible for you to post some examples of crush trades? Where do you find charts for spreads?
Runningman: http://www.danielstrading.com/education/technical-analysis/crush-spread.php Good explanation of crushing.
there are two ways to figure the crush...three ways actually. One is the actual crush, one is the crush margin (margin made by crushers), and then there is the exchange recognized crush for margin calculation purposes. The two you need to look at are #1 and #3. #3 link is here: http://www.cmegroup.com/wrappedpage...InterCommodityRates&h=2&reporttype=marginrate #1: the actual crush, which you'll see quoted on players sheets etc. is calculated as follows: 11 Bean Oil contracts + 2.2 Meal contracts, - 1 soybean contract. This takes into account the byproduct that comes from 5000 bushels of soybeans, and also factors it into a standard unit of measure. So for instance, if you calculate the september crush right now...you'll notice its trading around $98.35. from there you can extract the oil share etc...which I do find helpful in meal / oil spreading. As far as charting goes...I chart mine in DTN ProphetX, which also provides the crush data in a ready to use EOD quote sheet.
traderTX: Traded for a crusher years ago. Haven't looked at meal for quite a while. I recall inversions in meal were juicy opportunities, revisiting those spreads now for my own trading. I'm in small on the Q/U but getting trampled a bit... Agree with you the deferreds look excellent as well.