The spread market between these two feed substitutes has been a swing trader’s dream. The tight, consistent ranges and the support and resistance on each side of the trade have provided those involved with a great trade setup for months. After the recent USDA report, Corn has taken its turn as the whipping post in this spread. However, with what looks like a very healthy wheat harvest just around the corner, I feel this spread will continue its yin-yang action for the foreseeable future. I believe the corn will eventually win out due to its lack of fresh supply coming on line, a tight supply at the elevators and its role as a more preferable feed for livestock and ethanol grinding. The price of wheat is dependent on its use for feed.
- BUY JULY CORN
- SELL JULY WHEAT
Premium of 26-0 cents to the SELL side (Wheat) last trade of 13-6
- Risk will be 10-0 cents using a STOP ON CLOSE above 36-0 ($500.00) plus ALL trading fees
- Objective will be when July Corn is 15-0 cents more expensive than July Wheat ($1,250) minus ALL trading fees
Initial margin for this trade is $3,206. Traders using DT Pro or Vantage are encouraged to enter/exit this trade using the spread markets, executing one leg before the other leaves one susceptible to slippage.
It may not be possible to limit losses to the exact loss limit depending upon market conditions and the possibility of limit moves.
Take a look at the setup:
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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