Soy Meal/Bean Oil Spread: Doubled Up and Ready For More!

The Crush Spread Is Getting…Crushed

The blog entered a short position in the September soy meal/bean oil (x2) spread at +$500 (premium meal) on July 7th.  The blog then entered a second short position in the September soy meal/bean oil (x2) spread at -$3,386 (premium bean oil) on August 2nd.  Both positions will be risked to a two-day close above at -$1,386 (premium bean oil), which is $2k above the ‘add-on’ entry price.

In addition to triggering the ‘add-on’ short sale signal, the spread also did some technical damage when it closed back under last summer’s peak at -$2,518.  The close back under this high negates the mid-May breakout.

September Soy Meal Bean Oil (x2) spread daily

September Soy Meal Bean Oil (x2) spread daily

We are looking for the September soy meal/bean oil (x2) spread to return to the contract low of -$14,778.  But since most bear markets that occurred after meal reached a premium over bean oil descended to -$20,000 (premium bean oil) or lower, it would not be at all surprising if the spread fell right through the bottom of the chart.

As per the pyramiding strategy we laid out in the previous post on this spread, the blog will continue adding to the position every $2k down.

‘Add-On’ Trade Strategy:

The blog will sell another September soy meal/bean oil (x2) spread on a close below -$5,386 (premium bean oil).  If filled, exit all three spreads on a two-day close of $2,000 or more above the entry price of the third spread.

If the third position is entered, sell another September soy meal/bean oil (x2) spread on a close $2,000 below the entry price of the third position.  If filled, exit all four spreads on a two-day close of $2,000 or more above the entry price of the fourth spread.

To enter a short position in this spread, sell one 100-ton September soy meal contract and simultaneously buy two 60,000 lb. September bean oil contracts.

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