And greeted with the dullest day in month...
The MGEX Dec futures continue to stay firm relative to the CBOT -- over the last 7 sessions, wheat has rallied about 40-50 cents while the Dec MGEX/CBOT spread has held at about 17 cents premium MGEX.
On the calendar spreads, the futures are pricing in significant changes ahead for wheat--apparently all the wheat in storage is going to be pulled out very rapidly after December (or its owners will happily pay a premium for the privilege of storing it). I am looking at corn, beans, and oats trading at close to full carry for Dec/Mar and I think they are all more attractive than betting on further backwardation in wheat spreads. So far I have only pulled the trigger on a small number of oats spreads, but all look like reasonable protection against a sudden move up in grain prices.
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Big bearspreading on the close today in CBOT wheat. z/h trading out to 27 with h/n and n/z getting hit hard as well. Has been some definite paper bearspreading on the close the last week or so and looks like today they finally made a substantial dent in the spreads on the close.
ReplyDeleteIf the Z/H on the CBOT averages over approx. 29.5 for the Oct19-Nov26 period, the VSR is triggered to 14 cents/month, giving a full carry for Z/H of around 44 cents. That would be 6% of the price of the commodity for a three month holding period; a daunting prospect for passive index longs.
ReplyDeleteSure is! I gotta say VSR sucks but im starting to get the hang of it after trading the july and the sep. Would still much rather see it go back to a single storage rate....wishful thinking I suppose.
ReplyDeleteCBOT spreads getting hammered again today. z/h has been a great trade as the liquidity is getting better but spreads like z/n and h/n its just so tough to sell em and stick with em.