trading limit on wheat: What can I do?

Discussion in 'Commodity Futures' started by TraDaToR, Sep 4, 2007.

  1. TraDaToR



    I'm having trouble this morning trading WZ07... I've shorted at 805 4/8 one tick below what I think is a trading limit at 805 6/8.
    I have joined the bid at 805 4/8 trying to offset, but the bid is currently 180 lots and I don't think I will be able to offset 'til the overnight session end.

    So what can I do? Is it a trading limit( I've tried to take the 805 6/8 bid but my order is rejected )? Is a trading limit set for the day session too( That's what I was thinking )? In this case, price will probably go down this afternoon so I can take a few ticks, isn't it?Does someone knows what is my best option? It's the first time I am caught in this thing.

    Thanks a lot.
  2. no. 22

    no. 22

    If limit down you should hedge with the same or similar product on another exchange or another account, if possible, because when it goes off limit down there is no way to know which way price will go.
  3. BJL


    i hope for your sake it'll only be limit up for 1 day...
  4. mnx


    You can always use options to hedge.
  5. Wassup with exploding wheat? Did they discover that you can smoke the stuff to get high?
  6. Dogfish


    Yes it has definitely closed the overnight session limit up at 8054 still bid 164 lots on my TT screen

    Limit up 8054
    Limit down 7454

    March 08 also closed limit up but there are pre day session offers below the high so you may be able to do something with that month
  7. <i>"Wassup with exploding wheat? Did they discover that you can smoke the stuff to get high?"</i>

    Better than that... they discovered it is a widely-used ingredient in some rather important stuff. Things like flour, breads and pastries, pasta, cereals, food fillers use a little bit of the golden stuff.

    Farmers are so busy planting corn for fuel, they neglected low-priced wheat acreage. Petroleum prices raise production cost on every aspect of growing grains. Add in some weather-related challenges to the overall low yield, and demand meets supply at a higher place on the scale. Weaker USD plays a part in global wheat prices adverse to us, but that's a much bigger macro conversation.

    Two things:

    #1: Basement level grain prices of the past few years are gone for a long time.

    #2: Food prices will adjust upward at every single place that sells anything edible to the public. Significantly.

    The good news for us is, food prices aren't inflationary. Go ahead and back them out of your budget analysis... our government reports measuring inflation do :eek:
  8. TraDaToR


    OK thanks for your advices, I think I know what I'll do if i'm still short tonight..

    Dogfish, I don't know exactly how the uncrossing algorithm works but I think that the big bid just below limit will get all below offers at the day session open. Am i right?
  9. TraDaToR


    It's OK, I'm flat 804 2/8 at the open, 5 tick gain.

    In fact, trading limits can be an opportunity. Just short at the limit price expecting to get a few tick down and hedge if you are still short at the close. Any thoughts?
  10. You're risking a lot in order to make a little. Many times, a market can trade at the limit-price and reverse allowing you to make your small profit. Eventually, there will be a time when it doesn't. You get filled on your order and the market keeps trading higher "synthetically". The next session can open sharply higher or lock-limit and now you've got a huge loss. When a market "locks limit", keep an eye on the at-the-money options in order to get an idea of how far away the market is trading from the limit. You can use an option offset to prevent the loss on a futures from getting out of control.
    #10     Sep 4, 2007