COMMODITY FUTURE PROJECT
Soybean
Describe your game plan when you initiated your first trade
With respect to my first trade, my first plan was visualizing the trade over and over again. While allowing the progress to take place, I had to let the market prove me right or wrong. Moreover, although my plan was to do this exercise several times, I was mentally rehearsing as well as practicing its peak performance i.e. just creating an effective routine. At this point, what it meant to me is that I was able to establish an effective routine strategy which connected all the strategies and through repeating this process over and over is was to become the trader I know is inside me (Ang, 2014).
Why you decided on a particular commodity (soybeans or wheat) to pursue
The reason for deciding to pursue soybeans is basically because its future quotes are relatively promising and achievable. Conversely, soybeans is relatively or readily available hence the expenses to be incurred it acquiring them was to be minimal.
How you decided which side of the market to be on first (buy or sell)
With respect to the above considerations, I decided to take the buying side of the market. The implication for this is because the soybean buying side is comparatively better unlike the selling side because I had the potential of making a lot more from such an investment which is technically true but far from the average case (Ang, 2014).
What was the trend in futures prices prior to your transaction?
Considering the current market situation, the future prices for soybeans is likely to be better because of the increasing perceptions of the clients about this product. In connection to that, I had to design my prices before embarking on this transaction. Therefore, the prices for the whole of November include;
(1016’6 1031’0 1015’5 1021’0 1030’4 1024’4)/8
1016’6/8 1031’0/8 1015’5/8 1021’0/8 1030’4/8 1024’4/8
1.01675 1.0310 1.015625 1.0210 1.0305 1.0245
Section 2: graphical representation
Section 3
Based on the graphical representation, ultimately, all the sources needed for trading the soybeans as well as the fluctuations in the market over a short-term is influenced by various factors. One of these factors is buyers’ psychology. The technical traders buying are based on the volume or price fluctuations remains to be the heaviest users of psychology in the market. In other words, it was difficult to predict what the market was to do, based on the customers’ perceptions on soybeans.
Another factor is the buyers’ expectations. The market price fluctuates due to the fact that people perceive that is now worth less or worth more. Although news caused price fluctuations, price movements often exceeded the change which underlined the value of the soybeans which the information indicated. Moreover, this swing is coupled with the psychology of the traders in the market. This in return overshadows the general impact of the real news item (H.N.W.II, 2016).
There are various economic factors which caused increase or decrease in future prices. Nevertheless, in most cases, demand changes because of the changes in price of the soybeans with other factors held constant. It is these factors which determine the level or position of the soybeans in the graph. It can be noted that whenever there is a change encountered in the non-price factors, a right or left shift can be witnessed in the demand curve.
In connection to that, because of the availability of the substitute goods, the price of the soybeans dropped. The reason for this trend in this day was because buyers had an alternative to buy hence posing a great challenge. The prices had to fluctuate till an equilibrium price was obtained. Because of this trend, supply and demand was much impacted i.e. there was no need of supplying more yet the quantity demanded was relatively low (Moore & Longenecker, 2008). The only option that remained was to maintain the market equilibrium price. All this happened on November 16th 2016
Section 4
Profit = {(cost of sale-(buying price + other expenses)}
= (1.0245-1.01675) x 8 x 1000
= 7.75-3 x8 x 1000
=0.062 x1000
= 62 – broker fee
=62-45
=$17
With regard to the above computations, although I didn’t lose my money, the reasons for realizing relatively low returns are because of the factors discussed above. In other words, as a trader the strategy I had is making decisions of instinct together with the use of probabilities and numbers so as to arrive at the decision of investing. Since the market responded positively to my expectations, my probability was to make at least $0.01 on a trade. My profit was to be linked with the various measures for example the rate of return, the buying price and so on. All this entails the amount of profit to be earned in relation to the total amount in invested in the business. Additionally, so as to determine whether my investment was to do well, I had to compare it with the return that was to be in the position of obtaining from such a low-risk investment opportunity (Moore & Longenecker, 2008).
Reference
Ang, A. (2014). Asset management: A systematic approach to factor investing.
Moore, C. W., & Longenecker, J. G. (2008). Managing small business: An entrepreneurial emphasis. Australia: South-Western/Cengage Learning.
HIGH NET WORTH INVESTING. (2016). Place of publication not identified: MARSHALL CAVENDISH INT'L.
http://www.cmegroup.com/trading/agricultural/grain-and oilseed/soybean.html?optionExpiration=F7
