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I am not sure if it is in the interest of the current American president to keep wheat prices low and, thus, to reduce profits of farmers. Ukraine and Russia, two other large Producers of wheat, probably also are happy with high wheat prices.
I think wheat price will come down when farmers begin talking about their planting intentions for 2018. At current prices acreage might rise.
Yes if some recent weather changes it could go down a bit more. Some farmers I know use it as thier first crop then silage it or bale it green then plant a second crop behind it in the same yr. Maybe a fast maturing bean or peas or a cover of oats seeded with alfalfa in in which case they normally bale the oats. Either way they get two crops out of the same field but if wheat gets so high they may forget about the second crop an let the wheat mature, in which case there may be more wheat on the market than one thinks. Just a thought of mine.
I'm re-examining my exit strategy for losses now that I have a sizable sampling of trades on my current option selling system. In the past 11 months I have completed 110 trades. I either exit when a trade drops down to cabinet price or when it hits a multiple of the premium. I'm wrestling with the pro's and cons of different premium multiples for taking losses. Ei; lower multiples have smaller losses but more losing trades. On the other hand larger multiples have bigger losses but less losing trades. Based on the performance below I'd be grateful for some opinions on what would be the best premium multiple to take a loss on.
110 option selling trades (draw-downs prior to exiting at cabinet price):
0% draw-down: 38 of 110 trades (34.5% had no draw-down)
100% draw-down: 20 of 110 (18.2% doubled)
200% draw-down: 7 of 110 (6.4% tripled)
300% draw-down: 4 of 110 (3.6% quadrupled)
400% draw-down: 3 of 110 (2.7% increased 5x)
500% draw-down: 2 of 110 (1.8% increased 6x)
600% draw-down: 1 of 110 (0.9% increased 7x)
None of the trades had a larger draw-down than 650%
Based on this sampling if I worked with a risk parameter of 700% I wouldn't have had any losses. However that requires trading a smaller number of contracts in order to keep the risk per trade at a reasonable amount. Still perhaps that's the way to go?
What multiple of premium would you all use for taking losses based on this track record?
I usually use the order of magnitude of a 100 % draw-down. I like having a strong support / resistance in the underlying, which I use as criterium to exit.
Furthermore I buy back an option in case fundamentals change significantly, or if I do not understand the price movement anymore.
I think a key point, at least for me is if I no longer understand the movement. I have been in those situations an contemplate holding my position or getting out. Those are wise words myrrdin!