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.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.