In a van, down by the river. | I totally agree on the perspective that money flow rules right now. Just look at old-crop bean spreads - fundamentals would say that we should have tremendous carries, but the money flows say funds short futures need to buy H and sell K, and South Americans selling more K than H or N? As we've been accumulating grain I've been willing to take a pinch of these carries all the way out to the DEC'16 (corn), and may look out further but, need more conviction (i.e. like Maize says - study and pick a target). With corn and cash this cheap, it seems we are learning a new definition of "large carries". So maybe this is good enough to protect a little in case some volatility snatches it away? I usually do best when I think of setting carry spreads as buying a "zero down" call option...if the market does nothing it costs me nothing...if the carryout grows, I'll have opportunity cost, but there's a limit to how much carry the market will pay...but if the rocket bull lifts off, owning the spread could be the difference between red or black ink on this hedger's ledger... |
Mar - Dec corn spread.
