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FUTR: Grains

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<DIV><FONT size=2>March Soybean failed to follow through on Monday's Weather 
Hype Rally ... any further weakness today would make this market vulnerable to a 
big sell off from its very over bought condition (SH is down 2.00 cents on 
Project A). If Soybeans were to trade up today and then make a new daily low 
after the first 20 minutes of trade, they would be a sell. This same trade also 
applies to January Soybean Oil. March Wheat can be sold if it trades up into the 
295 resistance area. </FONT></DIV>
<DIV>
<P align=left><A href="http://homepage.macomb.com/~mig/113098/02osc-s.gif";><FONT 
size=2>MARCH SOYBEAN</FONT></A><FONT size=2> | </FONT><A 
href="http://homepage.macomb.com/~mig/113098/02osc-bo.gif";><FONT size=2>JANUARY 
SOYBEAN OIL</FONT></A><FONT size=2> | </FONT><A 
href="http://homepage.macomb.com/~mig/113098/02osc-w.gif";><FONT size=2>MARCH CBT 
WHEAT</FONT></A><FONT size=2> </FONT></P>
<P align=left>Dennis</P></DIV>
<DIV>Home Page <A 
href="http://homepage.macomb.com/~mig/home.htm";>http://homepage.macomb.com/~mig/home.htm</A></DIV></BODY></HTML>
</x-html>From ???@??? Wed Dec 02 07:15:58 1998
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Date: Wed, 2 Dec 1998 09:39:55 EST
Reply-To: I4Lothian@xxxxxxx
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From: I4Lothian@xxxxxxx
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: CBOT Memberships & Grain Marke Liquidity
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Be on the lookout for liquidity air pockets in the grain and soybean futures
complexes in the coming months due to a reduced number of traders in the CBOT
futures pits due to the attractiveness of trading at the CBOE.

Some facts and some thoughts:

A Full CBOT membership traded today for $490,000.  The cost to lease the seat
is $7200 per month.
A CBOT Associate membership recently traded at $197,000.  The lease cost is
$2500 per month.
A CBOT COM membership recently traded at $58,000.  The lease cost is $550 per
month.

With a Full membership, a trader can trade anything on the CBOT or at the CBOE
if they have passed the proper classes and have the proper registrations.

With an Associate membership a trader can trade all the financials at the CBOT
and on the Midam financials.

A COM (Commodity Option Membership) allows traders to trade financial or
agricultural options.

Owning an Associate membership and leasing it out reflects a return of
approximately 15% ($2500 x 12) / $197,000.  The return on the Full is about
17%.

The Associate membership price reflects 40% of the value of the Full
membership
price.  Extrapolating the 40% value to the lease prices for Associate it would
reflect a lease rate of $6250 for a Full membership.  However, the Full
membership is leasing for $7200, almost $1000 more.

I think this premium reflects demand for the Full memberships in order to
utilize their CBOE trading rights.  Given the current sluggish activity in the
grain futures pits and the number of traders physically present in the grain
futures pits these days, I would not assign this value to merit of being able
to trade the grain futures markets.

Since we are approaching the Holidays and winter, this skewed relationship
could cause more Full memberships to be put into use over at the CBOE as
membership become available for lease over the winter.  

One of the strengths of the CBOT has always been the depth of the locals in
the
pit and their ability to make markets.  With the stock market racing this way
and that, the opportunities at the CBOE may well attract more and more
memberships away from the futures floor of the CBOT.  This type of stock
market
volatility was made for options traders. 

On the other hand, the skewed lease rate for the Full membership and the
narrow
trading of the grains may force some traders out of the pits.  It could also
have an effect on the supply and quality of filling pit brokers in the
futures.
 With the cost of the lease higher, it is that much more volume each broker
needs to do to make a living.  And volume is down.   Consolidation will be
occurring as brokers abandon their decks.  Or, some of these brokers will be
replaced with newer inexperienced brokers who are willing to accept less in
the
way of income.  

When the grain futures do have spurts of activity, things could get ugly price
action-wise and fill-wise due to the volume of orders flowing through fewer
and
less experienced hands.


Regards,

John J. Lothian

Disclosure: Futures trading involves financial risk, lots of it!

Disclosure: John J. Lothian is the President of the Electronic Trading
Division
of The Price Futures Group, Inc., an Introducing Broker headquartered in the
Chicago Board of Trade building.