Kansas-Chicago Wheat (II)
|
| Position | Contract | Entry | Spread | Allocation | Exit | Spread | Equity | Stop |
| Long | March KCBT | 552.0
|
|
| 489.25
| |
| |
| Short | March CBOT | 562.0
| -10.0 | 2 contracts
| 477.25
| +11.50 | +$1063
| -
|
Reason for Entry:
This spread was entered just after the other Wheat spread. The basis behind going long Kansas and short Chicago is the seasonal pattern that exists from late in the year to early the following year. As the winter crops become available, buyers, particularly exporters prefer the hard red wheat (Kansas) to the soft red (Chicago). This has created a pattern whereby the Kansas-Chicago spread widens over this time.
Technically, an oversold spread price suggested the timing was right for an entry.
Reason for Exit (same as other Wheat spread):
The spread had made a decent move in our favour, and was at risk of correction given the potential for the US Dollar to correct as well as a bullish USDA report. It was simply time to exit given the balance of probabilities.
Result:
A profit of $1075 per spread or 4.30% on the recommended allocation.
Both Wheat spreads turned out rather well. There was a point where we were close to exit in both spreads given a quiet market, but patience won out.
Seasonal Charts and Data:
Current Seasonal Window:
11th Dec - 25th Jan
Historical Performance:
This trade has been profitable 14 times in the last 15 years and showed an average profit of over $550 per spread over that time.
Initial Stop Loss:
15.0 below entry ($750).
Allocation:
2 spreads per $50,000.
Contract Codes (electronic):
Mar Kansas: KE H0
Mar Chicago: ZW H0
More Details:
www.cmegroup.com and www.kcbt.com
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Disclaimer: There is a Risk of Loss in Futures Trading DISCLAIMER HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. THE RISK OF LOSS IN FUTURES TRADING CAN BE SUBSTANTIAL. YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PAST PROFITS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THERE IS A RISK OF LOSS IN FUTURES TRADING.THE INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, HOWEVER IT CANNOT BE GUARANTEED AS TO ACCURACY OR COMPLETENESS, AND IT IS SUBJECT TO CHANGE WITHOUT NOTICE. IT SHOULD NOT BE ASSUMED THAT THE SEASONAL PRICE TENDENCIES SHOWN HEREIN OR THAT THE SUGGESTIONS REGARDING THEIR USE WILL BE PROFITABLE OR THAT THEY WILL NOT RESULT IN LOSSES. PROTRADER LLC, ITS MEMBERS OR EMPLOYEES ASSUME NO LIABILITY IN CONNECTION WITH THE USE OF THE INFORMATION CONTAINED HEREIN.
