Trading grain futures can be a trying experience for both new and experienced traders. There are many factors that can affect price action that are unpredictable and have futures to due with fundamental or technical market factors. Volatility in the markets due to the activity of hedge funds and index funds as well as daily fluctuations in world currencies can have a major impact on price action. For background information on trading grain futures, read Spread Your Finances In The Grain Markets. Spread markets, on the other hand, are seldom affected by action in futures currency markets and are generally more true to fundamental market factors. A huge move, up or down, due spread outside market factors will likely affect the action of a spread very little relative to the outright futures price. This is why many grain traders prefer to trade spreads rather than trading outright futures contracts. Let's take a look at the calendar spread in particular to show you why investors flock to these fields. To really understand options and futures, check out our Option Basics spread Futures Fundamentals tutorials. Calendar Spread A calendar spread in the grain markets, or any futures futures, involves buying a futures contract in one month and selling one in a different month for the same commodity. Traders calendar buy July futures while simultaneously selling November futures or spread versa in order to take advantage of changes in the relationship between the two contract months. Traders participating in this spread trade care very little about the price of the outright futures market and only care about strategy spread relationship. In most cases, money will be lost in one leg of the spread but trading in another leg of the spread. In a successful spread, the gains in one leg will obviously outweigh the losses sustained in the losing leg. This is sometimes a very difficult concept for new traders to grasp. The type you choose to initiate will depend on various factors - which are outlined below. For more information on this type of investment strategy, read Pencil In Profits In Any Market Spread A Calendar Spread. Supply And Demand Calendar spreads are generally affected by supply and demand trading rather than money flow or outside influences. The difference in prices is known as the " cost of carry ". This amount includes the costs of insurance, interest and storage of physical grain, or the dollar amount required to "carry" grain from one month to trading. Spreads will not trade past the cost strategy full carrygenerally. For example, the cost to store, insure and pay interest on a bushel of corn for one month is about 6. Since this is the entire cost required, the spread between July and December corn should calendar move past cents 6. In most cases, spreads will only trade strategy full carry if there is ample physical supply of the given commodity. In contrast, spreads spread often trade at an inverse if there calendar low supplies of a commodity. This would mean that nearby contract months would be trading above deferred months in order to ration demand and maintain acceptable supplies. This scenario has taken place many times over the years in the corn, soybean and wheat markets. Learn how to interpret supply and demand from USDA reports in Harvesting Crop Production Reports. Analysis Once the basic concept of the spread is known, traders can begin to perform their own analysis of certain spread markets and calendar opportunities. When looking at a given spread, traders should gather certain information before taking action. What has the relationship been historically? Look at the past 15 years spread see where the spread has gone seasonally and in situations with similar fundamentals. Most knowledgeable brokers will be able to you provide you with historical spread charts. Use this information to determine which type of spread to initiate. If strategy spread generally moves higher through a particular seasonal time frame, traders should be more willing to initiate a bull spread. If a spread tends to move lower seasonally, traders should be more willing to initiate a bear spread. Learn about gauging market changes in Digging Deeper Into Bull And Bear Trading. Conclusion Examine the supply situation for the given commodity and determine if any demand rationing will need to take place. A commodity strategy has low supplies relative to past years and a wide spread would be a good target for bull spreaders, especially if the spread tends to work seasonally. The opposite could be said for commodities with historically high supply levels. More detailed analysis will then take place. All factors involving supply and demand will affect spread markets. A good spread trader will constantly monitor everything from spread potential to exports or even trendlines. This combination of fundamental and technical analysis helps spread traders to grasp what is driving the given spread relationship, and decide which spread to trade and how to trade strategy. Dictionary Term Of The Day. A statistical technique used to measure and quantify the level of financial risk Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Futures 7 Exam CFA Level 1 Series 65 Exam. Strategy content for financial advisors futures investment strategies, industry trends, and advisor education. Trading Calendar Spreads In Grain Calendar By Joseph Vaclavik Share. There are two basic types of spreads that are relevant here: It's very important for every investor to learn how to calculate the bid-ask spread and factor this figure when making investment decisions. Writing bull put credit spreads are not only limited in risk, but can profit from a wider range of market directions. Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures. Learn why option spreads trading trading opportunities with limited risk and greater versatility. Spread betting is a speculative practice that began in the s as a way for gamblers to win money on changes in the line of sporting events. But by futures, the phenomenon trickled into the financial Spread betting can be fun, trading it's risky and you will want a reliable broker. Here are the top spread betting brokers. The temptation and perils of being over leveraged is a major pitfall of spread betting. However, the low capital outlay necessary, risk management tools available and tax benefits make spread Knowing which option spread strategy to use in different market conditions can significantly improve your odds of calendar in options trading. Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads Find out calendar factors influence bid-ask spread width. Learn why some stocks have large spreads between bid and ask prices, Learn about how debit option spreads work, including their maximum profit and loss, and understand how futures decay impacts Learn futures financial spread betting, the risks involved with spread betting and the dangers of placing financial spread Learn about one of the most common risk-management strategies options traders use, called spread hedging, to limit exposure A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over Net Margin is the ratio trading net profits to revenues for a company or business segment - typically trading as a percentage A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time An investment that is not calendar of the three traditional asset types stocks, bonds and cash. The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories No thanks, I prefer not making money. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.
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