Today is August 10, 2007. If I'm bullish on corn. What would the difference be if I purchased one contract for the Sept corn versus the Dec corn? I realize the Dec expiration would give me more time, and is more expensive, on the Dec but I'd like to know if there are any other dynamics involved. Any other comments are most welcome. Also, any book recommendations are also welcomed! B
Given the "carry charge" structure of the market right now, you would be the one who's paying the "storage" that exists in the defered contract months. From a seasonal perspective, grains begin their "harvest decline" this time of the year. Export buying usually begins after the harvest is complete. Translation.......don't be too bullish now.
Rarely do I find you in error (you're a very smart guy) but the usual time for a production time decline in Corn is early July. This year we certainly saw it. July broke $1.10 in thirteen sessions. The break cost me exactly $100,000. Thank goodness I had some winning trades going in other markets or I would have been in deep...... It's true that a second leg lower can commence in August or September if the trade becomes convinced that no early frost trouble is on the horizon. This is just one longs opinion but I believe the lows are in and that Corn has permanently revalued just like Crude, Gold and several other commodities.
From a "value" perspective, it's tough to be bullish on ~$3.50/bushel corn, ~$7/bushel wheat and ~$9/bushel soybeans at this time of the year.
No doubt. The same way that for years I was getting my butt kicked by shorting S&P's at 400,500,600 and 700. Sticker shock is no reason to be bearish. Every thirty years or so markets don't revert back to the old mean. The same way the 70's said adios to 3 cent Sugar and $35 gold, this era is saying goodbye to 3.25 wheat. Getting back to your original point: Export numbers remained buoyant all year despite high prices. Of course much of that was mitigated by a low dollar.......
Moisture concerns are pretty much out of the market by now. After all it's already mid-August. The crop is what it is. Unless there's a calamity, i.e. an early freeze, the trade is now concerned with the demand side of the equation. The corn crop is huge, as expected, but exports are also huge.
Hey I want to trade agr options but have little understading about the ag markets. What do some of you more experienced ag traders feel is a reasonable approach to get started. I'm not new to mkts and trade equity/index options so my main desire is to learn about the mechanics and dynamics of an ag market and not so much say the contracgt specs which are easily obtained. I'm thinking of starting with beans and eventaully learning about all ag products ultimately finding options on one or two that fit to trade in the near future. Thanks.