Soy Meal/Bean Oil Spread: Let’s Keep On Rollin’

Roll to the December Spreads

The blog entered a short position in the September soy meal/bean oil (x2) spread at +$500 (premium meal) on July 7th.

The blog entered a second short position in the September soy meal/bean oil (x2) spread at -$3,386 (premium bean oil) on August 2nd.

The blog entered a third short position in the September soy meal/bean oil (x2) spread at -$5,892 (premium bean oil) on August 15th.

The blog entered a fourth short position in the September soy meal/bean oil (x2) spread at -$7,968 (premium bean oil) on August 19th.

We are currently in the September spreads.  They need to be rolled to the December contracts because of the First Notice Day for all of the September grain contracts on Wednesday.  So let’s go ahead and get this done today.

December Soy Meal Bean Oil (x2) spread daily (30-day MA)The soy meal/bean oil (x2) spread has been in a steady decline for nearly two months now.  We are still targeting a downside price of -$20,000 (premium bean oil) or lower.  The aggressive pyramiding plan is to keep adding every $2k lower.  Eventually, we are going to get knocked out of the trade.  But large grain crops and bearish seasonal patterns in the September/October timeframe might allow us to keep getting “lucky” and ride it to the -$20k level before we get out.  Keep your seatbelt on!

Trade Strategy:

On the four short September soy meal/bean oil (x2) spreads entered at +$500, -$3,386, -$5,892, and -$7,968, roll to the December contracts at the market-on-close on Monday, August 29th.  Risk all four of the December spreads to a two-day close above -$6,900.

‘Add-On’ Trade Strategy:

The blog will sell another December soy meal/bean oil (x2) spread on a close below -$10,900 (premium bean oil).  If filled, exit all five spreads on a two-day close of $2,000 or more above the entry price of the fifth spread.

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

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

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