MRCI`s Free Trade of the Month

INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
JUNE
INDEPENDENT. OBJECTIVE. RELIABLE.
About Moore Research, Inc.
Moore Research Center, Inc. (MRCI), an authority in statistical research for seasonal trading, features approximately 30 Monthly
historical trading strategies for outrights and spreads from a variety of the major commodity markets. MRCI bases its research
and strategies on the last 15 years. From that, seasonal trades are chosen as much as 3 months prior to publication in the monthly
report and as much as 12 months prior to their seasonal entry date in special reports.
SPECIAL OFFER FROM MRCI & DANIELS TRADING:
Two Week Trial Subscription to MRCI Online
http://www.mrci.com/catalog/special_offer.php?sourcecode=DT
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
Buy October 2014 Sugar and Sell July 2015 Sugar
For June’s MRCI free trade of the month, we will be looking at the October 2014 Sugar vs July 2015 Sugar bull futures spread.
The spread is a bullish play on Sugar because we are long the front month (October 2014) and short the deferred month (July
2015). To learn more about the differences between bull and bear spreads, please review this blog article, “Basics of Futures
Spread Trading” by Craig Turner. When looking at bull seasonal futures spreads, we look for the following criteria:
▪▪
Bullish Seasonal Factors
▪▪
Bullish Fundamentals
▪▪
Historically Low Spread Prices
SEASONAL EXPLANATION & WINDOW:
The seasonal window for this spread is from June 8th to July 9th. Please note it is not absolutely necessary to follow the exact
dates of the seasonal window. It is more of a guide then a hard rule. According to the MRCI web site, the seasonal reason for this
trade is “As sugar crops in the Northern Hemisphere enter their crucial vegetative and growing season, prices have already discounted the
beginning of Southern Hemisphere harvest. Thus, prices have tended to begin enjoying a strong seasonal uptrend that typically carries
through July. As they do, the market is more concerned with prospects at harvest than supply a year from now, thereby driving bull spreads
and shrinking storage premiums.”
CURRENT FUNDAMENTALS:
Apart from the seasonal reason for this trade, we also find the current fundamental analysis of sugar interesting for this seasonal
trade. For the past four years the global sugar production has been at a surplus to annual demand. This year that trend may
reverse based on what is going on in the world’s largest sugar producing nation. Brazil, which accounted for 28% of the global
output last year and 57% of exports, had a very dry summer that damaged tropical crops like sugar. Global supplies are still ample,
but with the current crop shrinking, demand stabilizing, and the commodity funds building long positions, there are bullish cards in
the deck for Sugar. Add in the possibility of an El Nino effect developing and that could bring down production further.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
15 YEAR SEASONAL CHART:
Historically speaking, the Oct 14 vs July 15 spread price is trading in the lower range of prices. If you look on the monthly chart
of the spread below, you will see spread is trading around -1.00, which is within the range of prices the past few years and there is
room to run higher. While we are not at extreme lows (-2.93 in 2008 and -1.55 in 2010), it is in the lower end of the range of prices
for the past 15 years and if we are going to be bull spread, we prefer it if the prices were lower rather than higher.
Monthly October vs July Sugar:
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
MRCI RISK AND REWARD HYPOTHETICAL PERFORMANCE:
MRCI publishes a 15 year hypothetical history of how the spread performed each year during the seasonal window. One thing
that jumped out at me was the risk to reward profile. While past performance may have absolutely nothing to do with future
performance, I really liked the “Worst Equity Amount” the spread experienced in the yellow highlighted column on the far right as
compared to the “Profit Amount” column highlighted in light green in the middle of the table.
Historically the risk has been limited with this seasonal spread. Some years the spread barely does better than scratch, but in
others it has performed very well. The biggest catalyst of a bull spread like this is supply issues that arise during planting, growing
or harvest.
Refer to table on the next page.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
MRCI 15 Year Hypothetical Profit & Loss Table:
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE
FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED
BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO
ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT
ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION
OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE
RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
Oct 14/July 15 Sugar Spread Chart for 2014:
The last thing I like to do when evaluating a spread trade is look at what it has done over the past 6 months to a year. As you can
see below, this spread traded as low as -1.17 in January of 2014 and as high as +0.10 in March of 2014. That is a range of 1.27 pts
in 2014. In Sugar, 1.27 pts is worth $1422.40. If we get bull spread (and we want the chart to climb higher), then -1.20 looks like
a good stop point for the trade and the best case scenario target is probably hitting +0.10 again.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
TRADE STRATEGY:
This spread window starts June 8th and I like getting in around these prices. If you enter around -1.00 and risk to -1.20, that is a
20 tick risk, or $224 (20 ticks X $11.20 per tick). If the spread can reach +0.10 again, that would be a gain of 110 ticks, or $1232. I
think a run back up to -0.20 is more realistic, and a gain of 80 ticks (-1.00 entry and -0.20 exit) is $892. The margin on this position
is only $330 per spread and the rest of the trade details are below:
Long Oct 14 Sugar/Short July 15 Sugar Trade
Long
October 2014 Sugar
Short
July 2015 Sugar
Margin
$330
Spread Type
Bull Futures Spread
Spread Window
June 6th to July 9th
First Resistance
-0.45
Second Resistance
-0.20
Third Resistance
+0.10
First Support
-0.85
Second Support
-1.00
Third Support
-1.18
***Each tick in Sugar is worth $11.20***
This report was written by Craig Turner, Senior Broker at Daniels Trading and Author of Turner’s Take Newsletter.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES
OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR. STRATEGIES USING COMBINATIONS OF POSITIONS,
SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.
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INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
Contact Craig Turner
800.958.9470 Toll-Free
312.706.7610 Local
312.706.7510 Fax
[email protected]
Subscribe to Turner’s Take
http://www.danielstrading.com/checkout/?product_id=32745
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INDEPENDENT. OBJECTIVE. RELIABLE.
About Moore Research, Inc.
Moore Research Center, Inc. (MRCI), an authority in statistical research for seasonal trading, features approximately 30 Monthly
historical trading strategies for outrights and spreads from a variety of the major commodity markets. MRCI bases its research
and strategies on the last 15 years. From that, seasonal trades are chosen as much as 3 months prior to publication in the monthly
report and as much as 12 months prior to their seasonal entry date in special reports.
SPECIAL OFFER FROM MRCI & DANIELS TRADING:
Two Week Trial Subscription to MRCI Online
http://www.mrci.com/catalog/special_offer.php?sourcecode=DT
10
INDEPENDENT. OBJECTIVE. RELIABLE.
MRCI’s Free Trade of the Month
DISCLAIMER
STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS
TAKING A SIMPLE LONG OR SHORT POSITION.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE
IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE
DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A ‘’LIMIT MOVE’’, IT
MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH
MOVES OR CONDITIONS ARE COMMON OCCURENCES OR LIKELY TO OCCUR.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET
COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND
SOLICITATION FOR TRADES. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN
DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH
AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES,
TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE
INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND
RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING
FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD
UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR
THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR
CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE “RISK DISCLOSURE” WEBPAGE ACCESSED AT
WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH
NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES
NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICES.
THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CONTRACTS CAN BE SUBSTANTIAL. THERE IS
A HIGH DEGREE OF LEVERAGE IN FUTURES TRADING BECAUSE OF SMALL MARGIN REQUIREMENTS. THIS LEVERAGE
CAN WORK AGAINST YOU AS WELL AS FOR YOU AND CAN LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS.
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