On October 8th the blog entered a hypothetical long position in the December corn/oat spread at ‘even money’ when the spread closed above the declining 30-day Moving Average. Initially, we were risking a two-day close below -26 3/4 cents (premium oats). Now that the spread has been above the 30-day MA for over a month straight, we can eliminate the initial risk and even lock in a trailing profit by exiting this initial position on a two-day close below the rising 30-day MA.
Yesterday the blog entered another hypothetical long position in the December corn/oat spread at +47 1/2 cents (premium corn) when the spread closed above the August high of +43 cents. For this new ‘add-on’ position we are going to risk a two-day close below +20 cents (2 cents below the November 4th reaction low). Once the rising 30-day MA reaches +20 cents or higher, we will then risk a two-day close below the 30-day MA for both the initial position and the ‘add-on’ position.
We expect the corn/oat spread to eventually hit one-dollar (premium corn) or higher. Therefore, we will continue to watch for more low-risk setups to increase our size in the long corn/oat spread while keeping the overall trade risk steady or shrinking.