Heart of Ohio | Dockman - 9/5/2017 21:46 Okay so the popular reason for the continued down in spring wheat is unwinding of spreads. Selling mpls buying kc and chi. Sorry I'm slow but can someone tell me why it got wounded up in the first place ?Sell kc and chi and buy mpls. If this spreading is such a surefire profitable venture doesn't it sort of prove if you get enough spec money involved that futures markets can and are being manipulated by a portion of the traders? I understand premise they are based on and that is that seasonal patterns exist, but the people that make the trades must not fear black swans or don't feel to threatened by charts.
Dockman, I'll give it a go. IF one had a feel for the extent (or percieved) damage done to mpls wheat after the blizzard and beginning of dryness say back on May 1. A realative safe trade play on those events would be to buy MPLS and sell Chicago wheat verses an outright buy of MPLS. If having done that on the Sept contract of each ... say May 1st, you would have possibly gotten a spread of around .98 cents MPLS over Chicago. Today that spread settled at 1.81 MPLS over Chicago AND Sept. contracts are in delivery and one needs to get out (actually would probably done it last week) so ... needed to get out of spread and roughly an .80 profit (less fees of course) all serves to make the decision pretty easy for the spread trader.
Is it "sure fire" ... don't think so, but "relatively" lower risk and there are those who focus on spread trades. As far as markets being manipulated by a portion of the traders? Yes .... ALL of them are, ..... at least sometimes. Love it or hate it, it's how it works AND I would argue it's not a bad thing. (I.E. Liquid markets and MAYBE MPLS would never have went north of $8.00 this year w/o them.) |
Unwinding spreads?
