Yesterday the spread between December corn and December oats closed at ‘even money’ where they finished above the declining 30-day Moving Average for the first time in five months. This triggered a bullish trend change.
A hypothetical trade for the blog was triggered to buy one 5,000 bushel December corn contract and simultaneously sell one 5,000 bushel December oat contract at ‘even money’. Initially, the exit strategy is to liquidate the spread on a two-consecutive day close above -26 3/4 cents (premium oats).
At a minimum, we are looking for the spread to return to the one-dollar level (premium corn). If some low-risk setups occur along the way, we will discuss whether or not using them as opportunities to add to the long position in the December corn/oat spread would be a good idea.