Index rebalance....?

Discussion in 'Commodity Futures' started by TraDaToR, Mar 5, 2010.

  1. TraDaToR



    I came across this post on an another forum. The poster( a seasoned professional apparently ) is talking about the big down spike/limit move on corn this winter :

    "Given the huge number of unharvested acres many in the fundamental crowd were baffled about the bold upward revision given it's very hard to do any accurate inspections and NASS tending to be quite conservative in general. Having said that, given the OI changes positioning before the report between the tourists (macro funds, some technical funds) and people trying to front run the index rebalance the report would have had to be quite extreme to rally the market. Having said that I didn't foresee a ~6 std dev event (yeah, yeah - i know about throwing those sorts of numbers around etc, I just mean as priced by implied vols and a simple BS world) and it got quite spicy. Think all the people trying to play the index rebalance are flushed out and a lot of ownership has been transferred into stronger hands. We traded huge volume between the synthetics after the limit down on report day and the overnight session + yesterday's session. Anyone who wanted out could have gotten out. Macros seem willing to buy 370ies and people like South Korea were quick in launching tenders so there is consumer demand. With that picture and some index buying still around for the week it doesn't seem we'll move that much. Don't think consumers will chase it in the short term and don't think the farmer will chase it either, they sold a lot in the 420ies earlier. Don't see a huge short building in spec community yet either, too many got burned on the long side to want to make any big statements. We can still get decent revisions to the carryout in the march report when NASS can do some more proper inspections. "

    What does it mean to try to frontrun the index rebalance in Corn?

    Thanks a lot for your help.