I did write a post yesterday....don't know why it didn't go up.
The gist of it was that we've seen a lot of trend-follower short-covering. There isn't any particularly bullish wheat news nor any CBOT soft wheat shortage.
Our timing so far has been disastrous on the intermarket spreads, but I think we will see a recovery in hard wheat futures premiums.
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Trying some u/z bearspreads here currently (23.5). Feels like a big fund puking shorts in wheat today.....nat gas is also up huge so would make sense for a fund to be blowing out of short positions in two markets that are heavily weighted that way.
ReplyDeleteThe commercials need to keep u/z at 27 or wider in order to keep this gravy train rolling for them (average 80% or wider of fc). Otherwise we will not see z/h trigger which would be a big mistake on the commercials in my opinion.
Regardless im just taking a small stab at the market right now with bearspreads in u/z.
I believe the U/Z needs to average just 21.8 to trigger the next bump in VSR. The current "full carry" is 3 times 8 cents/month plus about 3.25 cents interest, so 27.25; 80% of full carry is therefore 21.8 cents Sep/Dec to trigger a bump to 11 cents/month-clearly the market is pricing in a strong likelihood of this.
ReplyDeleteMy understanding is that the calculations are done from the current stroage rate, not the prospective one. In the other direction, the Sep/Dec would have to average inside of 13.6 cents to be less than 50% of full carry and trigger a drop in VSR back to 5 cents/month.
Tom you could very well be right (and I think you are). I'll ask around and see what some of the other guys are saying as well. Regardless I have taken 1/3 of the position off at 28 and will take the remaining 2/3rds off at 29 and 30. Will be looking to bullspread at 30 and wider hoping for a squeeze pre roll or post roll like we saw with n/u.
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