NexusFi: Find Your Edge


Home Menu

 





Grains & Beans


Discussion in Commodities

Updated
      Top Posters
    1. looks_one myrrdin with 125 posts (152 thanks)
    2. looks_two WoodyFox with 40 posts (33 thanks)
    3. looks_3 SMCJB with 36 posts (53 thanks)
    4. looks_4 Schnook with 31 posts (43 thanks)
      Best Posters
    1. looks_one SMCJB with 1.5 thanks per post
    2. looks_two Schnook with 1.4 thanks per post
    3. looks_3 myrrdin with 1.2 thanks per post
    4. looks_4 WoodyFox with 0.8 thanks per post
    1. trending_up 69,154 views
    2. thumb_up 338 thanks given
    3. group 49 followers
    1. forum 294 posts
    2. attach_file 44 attachments




 
Search this Thread

Grains & Beans

  #221 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205


SMCJB View Post
Finally enabled CBOT data, a $120/month cost for me, and did my first ever Ags trade*. While I enjoy discussing trades and ideas I generally avoid discussing specific trades for several reasons** but for this I am going to make an exception as much to illustrate the types of things I do as anything else***. So today I bought the Soybean XFHK Double Fly (-35.25), sold the Soybean FHKN Double Fly (11.50) and sold the Soybean FHK Fly (15.75). I expect the margin requirements for these positions to be $935, $935 and $467.50 respectively. I'm going to be cautious as I get more comfortable but I think profit targets of 10c, 7.5 and 7.5c are conservative which equates to $500, $375 and $375 respectively. So total margin of around $2300 with a profit target of $1250 per unit. Each unit involves 16 futures so make your own commission assumptions. I looked at 3 different ways to enter the position and decided that trading the exchange listed butterflies XFH, FHK and HKN seemed to offer the best execution opportunities. While that might seem obvious it is definitely not always the case especially with double flys.

Next day (4th) I added to the positions at better prices (-40.375, +13.67 & +18). This is very typical for me on a mean reversion trade, to layer into a position. As the position gets close to my desired size I also trade a around the position a little. Taking a little off as it moves into the money allows me to reestablish the position if it moves back out again. Looking at the price action though I became concerned that these butterflys seemed to move directionally with the market direction. This would mean that the butterfly trade is dependent upon the market, or spreads moving in the right direction, and not necessarily reversion to the mean.

Due to my concerns, and as I did more analysis I tried to exit some of the position yesterday (5th). At one point prices were close to my original entry levels, so I had a small profit in the position but my execution wasn't quick/aggressive enough and the market moved back away.

Last night I completed my additional analysis and confirmed my fears that this trade is more directional than I would like and not a great mean reversion candidate. (Analysis in a minute). This morning I exited the position. I am a strong believer that if your thesis for a trade is violated then you should immediately get out and reassess whatever the PnL. Staying in a trade you don't want to be in, purely to avoid taking a loss is a disaster waiting to happen. On the XFHK Double Fly I incurred a loss of just over 2c/unit. With the FHKN Double Fly I had a small profit of just over 0.5c, and finally the FHK fly had a small loss of just over 0.5c. All in all an average loss of almost exactly 1c per structure vs original average profit target of 8.5c each. Nobody likes losing money but this is pretty insignificant and I'll chalk it up to some cheap education!

So let me explain further why I reversed course so abruptly.

Below is a chart of the Crude Oil XFHK Double Butterfly (ie +1 X, -3 F, +3 H, -1 K) on the X-axis plotted versus the Crude Oil X-K spread on the Y-axis. As you can see this is a very noisy chart, with no obvious pattern. While different years have different price levels, there is little correlation between the price of the double fly and the spread. (For what its worth I do not trade this Crude Fly, I just used it as an example as it is the same structure as the Soybean trade.) The Black Dots are this years data.



Now lets look at the exact same chart, but for Soybeans. There is now a clear relationship between the two. The higher the spread goes, the lower the Double Butterfly goes.



The reason there are more 2021 data points for the crude chart vs the soybean chart is because crude expires 2.5 weeks earlier. CLX1 is currently about 120 trading days from expiry while ZSX1 is about 137 days away.

Reply With Quote

Can you help answer these questions
from other members on NexusFi?
The choice of instruments to trade
Psychology and Money Management
MC PL editor upgrade
MultiCharts
Trade idea based off three indicators.
Traders Hideout
NT7 Indicator Script Troubleshooting - Camarilla Pivots
NinjaTrader
ZombieSqueeze
Platforms and Indicators
 
Best Threads (Most Thanked)
in the last 7 days on NexusFi
My NQ Trading Journal
21 thanks
Diary of a simple price action trader
20 thanks
Just another trading journal: PA, Wyckoff & Trends
17 thanks
Tao te Trade: way of the WLD
13 thanks
HumbleTraders next chapter
9 thanks
  #222 (permalink)
 
Schnook's Avatar
 Schnook 
Munich, Germany
 
Experience: Advanced
Platform: Sierra Chart
Broker: Interactive Brokers
Trading: liquid products
Posts: 570 since Jul 2016
Thanks Given: 1,166
Thanks Received: 1,917


SMCJB View Post
I am a strong believer that if your thesis for a trade is violated then you should immediately get out and reassess whatever the PnL. Staying in a trade you don't want to be in, purely to avoid taking a loss is a disaster waiting to happen [...] Nobody likes losing money but this is pretty insignificant and I'll chalk it up to some cheap education!

Amen. Did the same thing two days ago on a bond trade and prevented a small loss from becoming a stupid loss. Also learned something new as I revisited my data.

Thanks for sharing your thought process on this. As someone who rarely trades spreads and has never traded a fly I really appreciate these practical nuggets.

Reply With Quote
Thanked by:
  #223 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205


Oil demand is changing the dynamics of the soybean trade

As the energy market transitions to less fossil fuel-based products, biofuels and hydrogenated vegetable oil (HVO) are becoming part of the solution Ė increasing the importance of hedging key feedstocks, such as soybean oil, in the biofuels sector.

The white paper, "Global Feedback Volatility Intensifies for Biofuels," written by CME Group Researchers Paul Wightman and Fred Seamon, examines the factors impacting heightened demand for soybean oil and the benefits of hedging an increasingly volatile commodity.



CME:- Global Feedstock Volatility Intensifies for Biofuels
https://www.cmegroup.com/education/articles-and-reports/global-feedstock-volatility-intensifies-for-biofuels.html

Reply With Quote
Thanked by:
  #224 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205

Bloomberg: Over 700 Barges Stuck in Mississippi River From Bridge Crack
https://www.bloomberg.com/news/articles/2021-05-12/grain-barges-line-up-after-bridge-crack-shuts-mississippi-river

A crack in a bridge over the Mississippi River has stranded more than 700 barges, cutting off the biggest route for U.S. agricultural exports when the critical waterway is at its busiest

The New Orleans Port Region moved 47% of waterborne agricultural exports in 2017


Reply With Quote
Thanked by:
  #225 (permalink)
 jokertrader 
NYC, NY
 
Experience: Intermediate
Platform: Sierra, TT
Broker: N/A
Trading: Spread Researcher and crypto degen
Posts: 654 since May 2013
Thanks Given: 545
Thanks Received: 360

Soybean Doublefly closeout

First i want to say i think this trade was more lucky than anything else.. since it turned out to be more directional than expected. The idea was mean reversion but as was pointed. The margin on each doublefly should have been around $935 (so total margin should be around $1870 for 2 Qty) but in IB it is way way higher than that.

The doublefly was the ZS XFHK as you will see but initiated as separate flys and averaged in
The net profit before commissions shows as $772 which would have been good had the margin been SPAM

Note: i should point out that the hold time was about 2 weeks

Attached Thumbnails
Click image for larger version

Name:	IB_ZSEntry.JPG
Views:	101
Size:	34.7 KB
ID:	312950   Click image for larger version

Name:	IB_ZSCloseOut.JPG
Views:	79
Size:	32.0 KB
ID:	312951  
Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #226 (permalink)
 
SMCJB's Avatar
 SMCJB 
Houston TX
Legendary Market Wizard
 
Experience: Advanced
Platform: TT and Stellar
Broker: Advantage Futures
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,048 since Dec 2013
Thanks Given: 4,381
Thanks Received: 10,205

From another thread - there's an attached 20 page report.


SodyTexas View Post
Found an old report I made for a Dec Dec Corn Spread I wrote. It has some good information on how and what to look at in trading spreads.

It's a draft so ignore any grammar and spelling issues.

Enjoy

Sody


Reply With Quote
Thanked by:
  #227 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,687
Thanks Received: 2,651


myrrdin View Post
I started building a position in the short WN22-WN23 today just above 40 c.

This wheat spread moved above 50 c only 4 times since 1983, only once there was a strong up move before the end of the planting year.

The crop is far away from being planted, and in regular years this spread moves below zero, often to the region of -50 c.

Depending on the weather, the wheat price might move upwards. The highest price of the spread since 1983 during the year of planting was approx. 75 c. I intend to build the full position between 40 and 60 c, and will through in the towel at a close above 75 c.

Best regards, Myrrdin


With regard to the above-mentioned spread, it is interesting to note that the WN21-WN22 notes at approx. 13, whereas the WN22-WN23, which will not be in the ground until fall, notes at approx. 47.

Best regards, Myrrdin

Started this thread Reply With Quote
  #228 (permalink)
 jokertrader 
NYC, NY
 
Experience: Intermediate
Platform: Sierra, TT
Broker: N/A
Trading: Spread Researcher and crypto degen
Posts: 654 since May 2013
Thanks Given: 545
Thanks Received: 360

Thanks Iím wondering if N22/23 is so over valued whether u can create a fly/double fly with this as the center to try eliminate directionality but since itís a 12 month spread the other side would N24.. I will check this weekend


Sent using the NexusFi mobile app

Visit my NexusFi Trade Journal Reply With Quote
Thanked by:
  #229 (permalink)
 myrrdin 
Linz Austria
 
Experience: Advanced
Platform: TWS
Broker: Interactive Brokers
Trading: Commodities
Posts: 1,938 since Nov 2014
Thanks Given: 3,687
Thanks Received: 2,651


jokertrader View Post
Thanks Iím wondering if N22/23 is so over valued whether u can create a fly/double fly with this as the center to try eliminate directionality but since itís a 12 month spread the other side would N24.. I will check this weekend


Sent using the NexusFi mobile app

I would be interested to learn about your findings, but I doubt that it is possible to trade these flies.

The problem is that the WN24 is not yet traded. CME states for the Chicago wheat contract: "15 monthly contracts of Mar, May, Jul, Sep, Dec listed annually following the termination of trading in the July contract of the current year." I assume that the terminus "year" means the crop year. Thus, the latest July contract available would be the 2023. This is confirmed by IB offering the WN23 as the latest July contract, and showing data for the WN23 contract since August 2020.

Even for the WN23 contract volume is very thin. According to Interactive Brokers, there was only one week (!) since August 2020 with more than 10 contracts traded. Bid / ask spread is significantly larger than for the WN2022.

Best regards, Myrrdin

Started this thread Reply With Quote
Thanked by:
  #230 (permalink)
Hiraphor
London, UK
 
Posts: 35 since Apr 2021
Thanks Given: 12
Thanks Received: 36



myrrdin View Post
I would be interested to learn about your findings, but I doubt that it is possible to trade these flies.

The problem is that the WN24 is not yet traded. CME states for the Chicago wheat contract: "15 monthly contracts of Mar, May, Jul, Sep, Dec listed annually following the termination of trading in the July contract of the current year." I assume that the terminus "year" means the crop year. Thus, the latest July contract available would be the 2023. This is confirmed by IB offering the WN23 as the latest July contract, and showing data for the WN23 contract since August 2020.

Even for the WN23 contract volume is very thin. According to Interactive Brokers, there was only one week (!) since August 2020 with more than 10 contracts traded. Bid / ask spread is significantly larger than for the WN2022.

Best regards, Myrrdin

Just a note to add: the disjoint between the July wheat contracts for 22 and 23, ie trading old crop vs new crop is priced at those levels because of the tight supply in grains at the moment. It's pretty low across the board. It's more of a directional trade betting wheat supply will increase and prices will fall, so I don't think comparing it to the last however many years is too useful, imo would have to analyse wheat supply to make that trade. Just my two cents.

Reply With Quote
Thanked by:




Last Updated on October 5, 2022


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts