It's Corn! (ZC)
Aktualisiert
It's Corn!
Overview
This is my bread and butter, for the last 10 years I have played this trade. I come from an agriculture and energy background and will break down why this always happens in July as I feel this information is extremely relevant and can be applied to other agriculture based commodities (****note: just because it provides an explanation for corn does not mean it will act the same way with other agriculture commodities such as ZW however market volatility will happen). Unfortunately this year it came earlier than expected missing out on the initial draw down.. which in the initial short side... yes I am taking on some risk trying to squeeze more down side on it, safe play would be to wait for an established bottom (basic B*tch TA will work)
Explanation
Where to even begin..... 1st off one of the root factors in this trade that everything revolves around is understanding corn is in pollination season... So the idea is that during pollination season in the markets there is an element of uncertainty do to the fact the annual yield of corn can not be determined in this moment or even projected. As once an agricultural distributor in a past life, one thing to add and understand is that distributors use futures markets to hedge against losses. Whether it is energy distributors working at an oil terminal taking delivery or an apple juice concentrate distributors trying to offsetting contract on MGEX for months due to low liquidity, they all play the futures markets at least the successful ones.. So how a distributor would look at corns pollination season is due to the uncertainty of the yield, the hedge will turn into risk, and they aren't in the business of loosing. The yield should be projected by July 20th, however markets are forward thinking, so don't think you could short until the 20th wont work most likely.
In the past 30 years this trade has a 90% success rate and in the last 10 has a 95%+ success rate, the trade usually occurs around July 10th-14th this year we have started early having a 15-30% draw down. I believe people have caught onto the trade and due to the increase of open interest on the short side distributors are offsetting their hedges earlier, so you must be forward thinking here. Don't get caught up in the BS and most certainly DO NOT allow your greed to rule your trade. These psychological mind F*** games will make you poor af, don't be that guy! I can go on DM if you'd like to know more trying to keep this quick.
Set Up
Futures
We missed the initial draw down, there is a potential of another draw down to lower support as the open interest on the short side increases within the futures market (ProTip: Volume on futures is irrelevant, you need to look at the open interest, which is the holders of those contracts, which most exchange publish)
For this set up I will be shorting the ZCU3 contract and longing the ZCH4, this is a basic calendar spread. I will do this until Monday the 10th before the start of the markets, futures do not trade as the equities do, they are open all the time 24/7 365 (maybe not some of the banking holidays depending on the exchange). Once the 10th I will re-evaluate if open interest hasn't increase on the ZCU3 I will cut my loses, monitor and adapt to the market price action. Ultimately since I missed the initial draw down, I will be looking for a long off the bottom. It will not be a short term trade compared to the quick short, possibility into early August as trading will slow up a month out from expiration and I do not wish to own 5000 bundles of corn per contract, though the probability of going to August is minimal. This is where I will be looking to retire for a 6th time.
*** Find you're notional value, tick value, monitor open interest (if decreases substantially act accordingly as you most likely will not want to be the bag holders) Stop Loss set at 3-5% of account size NOT TRADE SIZE, be aware of expanding margin maintance so you know when fees/insurance you will be paying.
Options on Futures
Well if your a smaller account, scared of futures and physical delivery or poor and can't play futures due to the incurred costs of leaving a position open, options is your best bet to get in on the action.
Short the initial, I would hedge risk assuming you are a smaller account, I would look at a debit spread, risk reversal, longer legged strangle or buying naked (if you can cover that). due to the late entry I would not recommend buying naked puts. My strikes would be right OTM or even ITM, this will have a very low probability of success on paper don't fret paper doesn't account for what's happening in right now. This is not about TA but FA (qualitative). I would be looking to exit this trade same as the futures written above.
On the long side, I would go after the credit rather than paying a premium.
I would stay away from strangles as I have seen it absolutely rip some years, either sell the put naked or you can do something like a credit spread if you want to hedge some risk.
Anyway, may post again more may not who knows.
If you want to know more about commodity trading on futures markets you can listen to a podcast I was on here: Trading View mods have hit me with a warning for posting a link to a conversation....... hit me up on twitter and I can provide a conversation for you......
#ZC #Corn #ZCU3 #Futures
Or feel free to reach out, I'll get to it when I remember to check......
"It only takes one trade to get my wife back from her boyfriend"
-KewlKal
Jul 6
Comment:
Note***
I have left the July 17th fractal on the chart as this is the normal average on a reversal over the last 30 years. The time between Jul 10th and 17th is confirmation and monitoring mode.
Overview
This is my bread and butter, for the last 10 years I have played this trade. I come from an agriculture and energy background and will break down why this always happens in July as I feel this information is extremely relevant and can be applied to other agriculture based commodities (****note: just because it provides an explanation for corn does not mean it will act the same way with other agriculture commodities such as ZW however market volatility will happen). Unfortunately this year it came earlier than expected missing out on the initial draw down.. which in the initial short side... yes I am taking on some risk trying to squeeze more down side on it, safe play would be to wait for an established bottom (basic B*tch TA will work)
Explanation
Where to even begin..... 1st off one of the root factors in this trade that everything revolves around is understanding corn is in pollination season... So the idea is that during pollination season in the markets there is an element of uncertainty do to the fact the annual yield of corn can not be determined in this moment or even projected. As once an agricultural distributor in a past life, one thing to add and understand is that distributors use futures markets to hedge against losses. Whether it is energy distributors working at an oil terminal taking delivery or an apple juice concentrate distributors trying to offsetting contract on MGEX for months due to low liquidity, they all play the futures markets at least the successful ones.. So how a distributor would look at corns pollination season is due to the uncertainty of the yield, the hedge will turn into risk, and they aren't in the business of loosing. The yield should be projected by July 20th, however markets are forward thinking, so don't think you could short until the 20th wont work most likely.
In the past 30 years this trade has a 90% success rate and in the last 10 has a 95%+ success rate, the trade usually occurs around July 10th-14th this year we have started early having a 15-30% draw down. I believe people have caught onto the trade and due to the increase of open interest on the short side distributors are offsetting their hedges earlier, so you must be forward thinking here. Don't get caught up in the BS and most certainly DO NOT allow your greed to rule your trade. These psychological mind F*** games will make you poor af, don't be that guy! I can go on DM if you'd like to know more trying to keep this quick.
Set Up
Futures
We missed the initial draw down, there is a potential of another draw down to lower support as the open interest on the short side increases within the futures market (ProTip: Volume on futures is irrelevant, you need to look at the open interest, which is the holders of those contracts, which most exchange publish)
For this set up I will be shorting the ZCU3 contract and longing the ZCH4, this is a basic calendar spread. I will do this until Monday the 10th before the start of the markets, futures do not trade as the equities do, they are open all the time 24/7 365 (maybe not some of the banking holidays depending on the exchange). Once the 10th I will re-evaluate if open interest hasn't increase on the ZCU3 I will cut my loses, monitor and adapt to the market price action. Ultimately since I missed the initial draw down, I will be looking for a long off the bottom. It will not be a short term trade compared to the quick short, possibility into early August as trading will slow up a month out from expiration and I do not wish to own 5000 bundles of corn per contract, though the probability of going to August is minimal. This is where I will be looking to retire for a 6th time.
*** Find you're notional value, tick value, monitor open interest (if decreases substantially act accordingly as you most likely will not want to be the bag holders) Stop Loss set at 3-5% of account size NOT TRADE SIZE, be aware of expanding margin maintance so you know when fees/insurance you will be paying.
Options on Futures
Well if your a smaller account, scared of futures and physical delivery or poor and can't play futures due to the incurred costs of leaving a position open, options is your best bet to get in on the action.
Short the initial, I would hedge risk assuming you are a smaller account, I would look at a debit spread, risk reversal, longer legged strangle or buying naked (if you can cover that). due to the late entry I would not recommend buying naked puts. My strikes would be right OTM or even ITM, this will have a very low probability of success on paper don't fret paper doesn't account for what's happening in right now. This is not about TA but FA (qualitative). I would be looking to exit this trade same as the futures written above.
On the long side, I would go after the credit rather than paying a premium.
I would stay away from strangles as I have seen it absolutely rip some years, either sell the put naked or you can do something like a credit spread if you want to hedge some risk.
Anyway, may post again more may not who knows.
If you want to know more about commodity trading on futures markets you can listen to a podcast I was on here: Trading View mods have hit me with a warning for posting a link to a conversation....... hit me up on twitter and I can provide a conversation for you......
#ZC #Corn #ZCU3 #Futures
Or feel free to reach out, I'll get to it when I remember to check......
"It only takes one trade to get my wife back from her boyfriend"
-KewlKal
Jul 6
Comment:
Note***
I have left the July 17th fractal on the chart as this is the normal average on a reversal over the last 30 years. The time between Jul 10th and 17th is confirmation and monitoring mode.
Kommentar
Short Closed 7/12/23 Awaiting entry for long position, Calendar spread long ZCU3 and short ZCH4, 17th to the 20th be patient
Kommentar
Going Complete Degen., Sold Naked Puts today, looking to open calendar spread in the futures market on Monday the 17th. Expectation is that the futures trade will be completed just prior to Aug 1 as margin span will increase substantially with the Sept contract getting close to expiration. This is risky so monitor the open interest if it declines cut loses not worth 5k bundles of corn per contract showing up on your doorstep. "Doubling down with zero confidence allow my autism to carry me across the finish line. Have a good weekend and maybe my wife will come back on Tuesday..."
-Kewlkat
Trade ist aktiv
So sick of winning so much, SAD! The 2ndary short was not achieved that’s okay we got the first target on the short and the second trade is is killing it, hopefully Hunter Biden keeps dropping his coke for us, to save some monies on some more trades. Otherwise I’ll have to beat up the kids at the bus stop for their adderall again. So that target here is all dependent if you’re in ZCU3 you can exit now with some nice profit offset both legs of the calendar spread (leaving open bc I need my wife back from her boy friend). For options I’d let it ride (precisely what I’m doing) as I am after the premium not the bought call, as this will take some time to achieve its potential(already up 563/contract…), very rarely will I do the tastyworks 45dte trade for the premium bc it’s a garabage set up with no insight given but hey what can I say if it works it works. “my wife would be impressed if she knew I even had this kinda skill, shoulda showed her my other bank acc.” -kewlkat
Trade geschlossen: Ziel wurde erreicht
Closed as I made 75% of the premium on the option side and on the futures side (ZCU3) Margin Span is increasing, so nahhh im good, as the two determining factors for closing/offsetting the trade on both the option and futures contract.Made my money see you next year.....
"Has anyone seen my wife?"
-KewlKat
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