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In a message dated 97-07-01 00:54:20 EDT, ricrat@xxxxxxxxxxxxxxxxxxx (Rick J.
Ratchford) writes:
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A Point In Grainyness
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What are the characteristics normally found in the grain markets when
forming a bottom? Does it touchdown only to spike back up and shoot for
the stars? Not usually. The spiking type of formation when referring to
the grains is usually what you may expect at the TOP, not at the BOTTOM.
Note how Corn made a nice big move to the downside today. Is it likely
that it will not just shoot straight up? Although it can do so and has
done so before, it isn't very often and the odds are usually against it.
The normal type of action in the grains when bottoming is forming a
rounded type of bottom over a period of weeks. This kind of action can
wreck havic on a call option buyer who is not holding for the longer
term. Though I admit that my options experience is quite limited for the
time being, it has become known to me that as this bottom forms over
time, volatility may slowly move down to the point that getting ready
for an explosive move is near and then it is time to buy a call if you
wish.
Using FDATES, tomorrow is listed as a minor FDATE in Corn. You may note
a move up in this market. But then, will it just go up a few days just
to go down again until that rounded bottom is formed?
Within a couple of weeks, BOTH corn and wheat have a FDATE on the same
day. It is a significant one that may indicate that now is NOT the time
to go long. If your planning to, don't let me discourage you, but I
thought this information may be of some use. I wish I could tell you all
what the FDATE is exactly for these two markets, but this would violate
my agreement with my customers. I will usually do one market a week
where I will expose a FDATE, and this market is not it. But KNOWING that
it is coming up shortly and is NOT now should provide some assistance.
So look at the past, and note how the grains normally bottom as oppose
to topping. It will provide you with a wealth of information as to how
to approach a market such as corn that has been falling like a hammer to
a nail!
cheers!
:)
rick
>>
Points taken. Sure I do not expect a spike to go very highr right now. I just
believe that we might have a near term bottom and by using a spread gives me
the limited risk and a long time frame I desire. I am only risking about $200
per spread to make about $1000+ Long the 240 call short two 280 calls basis
dec. corn I do not use FDATES so I cannot comment much there, but thanks for
the input.
Jim
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