Hedge Your Speculative Bet!

HEDGE YOUR SPECULATIVE BET!

Do not be the little piggy who went to market without protection!

The nature of hedging is that you protect your position to eliminate or minimize losses.  For example, buying one contract of a commodity for some time in the future and selling another contract of the same product in an adjacent contract month.  Hedging has advantages for producers, end users, and speculators.  Usually producers and end users are attempting to protect a certain price for a future purchase or sale, while the speculator is attempting to minimize potential losses while maximizing potential grains for a given product.

TRY THIS WITH PAPER TRADING, NOT REAL MONEY ON THE LINE, BEFORE YOU TWEAK THE PROCESS.

This Friday (August 12, 2016), there will be a big USDA report at 11A central time.  One can reasonably expect a big price change as a result of this report for corn AND/OR wheat AND/OR soybeans.  Could be wrong, i.e. no big change at all and that would be different from other similar reports.

So now we take a “best guess” bet on one of the commodities which will be featured in this USDA report.  My guess is that soybeans will take a hit and the price will drop maybe even limit down.  I even heard one analyst say, soybeans might bottom around $8.50.

Guessing and hedging on the above, at five minutes before eleven, CT. do the following:

Sell Stop November, 16 soybeans at ten cents below the price at 11:55 A.M.
AND
Buy Stop November, 16 soybeans at nine cents below the price at 11:55 A.M.

If all goes according to plan, before slippage, you could lose a penny or $50.00 if the market drops and then bounces back.  NOTE:  There seems to be less slippage with electronic current trading platforms.  ALSO, If the market jumps up, you simply will not have a position.

Remember you can lose more than your initial investment when playing commodities.

Want more:  Buy my textbook on Amazon or my website at:  http://JohnLTimmons.com.

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