Of the two main positions outlined in yesterday's post, the MGE vs KC is the one that does not really fit with our core mission of exploiting index traders and the VSR regime. The MGE vs KC position is much more predicated on knowing something about the wheat markets--maybe that's why it's not working. We held it today, but we will not keep it much longer unless the P&L starts to get real positive, real fast.
At the CBOT open, the nearby July/Sep spread narrowed to inside of anticipated exchange storage costs (14.5 cents)--from 15 cents premium Sep to only 12.5 premium. The market then drifted back to around 13.5 cents for the rest of the day. First Notice is about a week away and this is a surprising move that needs to be watched. Neither the MGE nor KC spreads exhibited any similar moves.
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N/U was definitely scary today as myself and some other locals barely even noticed the first push in as it happened so fast. This volatility is going to kill off liquidity extremely fast as everybody has toned down their size dramatically or quit trading the spreads all together.
ReplyDeleteLooking to bearspread U/Z again around 23-25 as we probably see 30 again after july goes off the board
Sorry, BMH, didn't see your comment yesterday. I didn't see the N/U move at the open either- it was back at 13.5 by the time I looked. It turns out it was just noise.
ReplyDeleteI am being very cautious on the U/Z, but I cannot think of a scenario where it doesn't go to 31-34. Obviously, the key is to have a position that you can hold through any short-covering scenarios in the front month.
Here's one for you, BMH. Where are all the high-frequency algo traders that dominate the equity market? Why aren't they all over commodities and commodity spreads?
haha well I dont know too much about that side of the business but I can definitely say that these spreads are full of machines......bids/offers get cancelled in the blink of an eye (no real liquidity just trying to manipulate the pro rata algorithm so they get allocated more of the incoming paper)its impossible to try and combo these spreads anymore as the size on the bid/offer is 99% BS. Just have to pick your levels and put em on in my opinion.
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