Trading commodities

[samhill]

I'm in southern Manitoba looking to do some trading/hedging. Looking for a broker, would anyone make a comment or recommendation? any advice other than "don't do it"?

[Cat_Herder]

I'm in southern Manitoba looking to do some trading/hedging. Looking for a broker, would anyone make a comment or recommendation? any advice other than "don't do it"?

Scotia MacLeod

[redleaf]

Put your money in an envelope and send it to Chicago.

[redleaf]

Reread your post Sam hill and saw the part about other than don’t do it, so I apologize. But I still think it’s funny.

[samhill]

Trading

Thanks for replies and yeah, cut out middle man.
Can I have two different brokers. Say one for wheat and another for canola.

[farmaholic]

Are "average" trading account profits measured in thousands, tens of thousands or hundreds of thousands?....serious question!

Remember...average. assuming hundreds of thousands doesn't apply....if it does, don't be stupid and actually farm.

Which wheat exchange is biggest? CBT's?



Don't get too cocky....and I'm Chicken.

[Oliver88]

If you deal with Royal Bank, their brokerage is Dominion Securities.

(From what I've been told CIBC doesn't have an equivalent brokerage for trading commodities.)

[Oliver88]

Great question Farmaholic, it would be good to know the difference in liquidity between different wheat classes.

Maybe Farming101 or Errol can get us an answer?

[Grahamp]

The first question is how many transactions are you planning on? If you are going to be trading actively the commissions at a full service broker will eat you alive. Assuming you are comfortable with online order entry IB (Interactive Brokers) is probably your best bet. They used to not trade canola there but it looks like they do now. On the other hand if you are doing 1 hedge per year the a full service broker is fine and you can just call up the broker to place your order.

You shouldn't need 2 brokerage accounts for wheat and canola, unless the broker doesn't offer them both. If you open 2 brokerage accounts (big traders do this in case one of their platforms goes down or there is ever problem with the solvency of one of the firms) the only thing you have to be aware is not being simultaneously long and short the same commodity in different accounts. This is illegal.

CBOT is largest wheat market however Minneapolis most closely reflects Canadian HRS.

[blackpowder]

Over the years I've spent money with them all. Eventually account empty. Guess I'm not an active trader.
Now I'm with a smaller firm in Winterpeg. Hedging actual production only. They keep track of it for me. And they dont troll.
We'll see.

[farming101]

Graham summed it up well.

While Minneapolis best reflects the Canadian HRSW market, it is a lot smaller. Liquidity or at least the ability to execute a trade when you want can be an issue. Usually that does not present a problem for a producer because he is in the market to hedge production, not speculate.
A market order gone wrong can have you running to the bank. I would not advise anyone to trade on their own if they do not have experience in the futures market.

During the wheat market run up this summer MW was at best a little under 11% of Chicago total volume. Recently it is about 6% of Chicago total volume. Kansas wheat is around 50% or less of Chicago recently.

[farmaholic]

"Are "average" trading account profits measured in thousands, tens of thousands or hundreds of thousands?....serious question!".............

come one guys, just wondering if I'm missing out on something and possible early retirement, freedom 55 or something better! A hobby?

[GDR]

The first question is how many transactions are you planning on? If you are going to be trading actively the commissions at a full service broker will eat you alive. Assuming you are comfortable with online order entry IB (Interactive Brokers) is probably your best bet. They used to not trade canola there but it looks like they do now. On the other hand if you are doing 1 hedge per year the a full service broker is fine and you can just call up the broker to place your order.

You shouldn't need 2 brokerage accounts for wheat and canola, unless the broker doesn't offer them both. If you open 2 brokerage accounts (big traders do this in case one of their platforms goes down or there is ever problem with the solvency of one of the firms) the only thing you have to be aware is not being simultaneously long and short the same commodity in different accounts. This is illegal.

CBOT is largest wheat market however Minneapolis most closely reflects Canadian HRS.

Why would you want to be short and long at the same time? Wouldn't equal volumes just cancel each other out? Or do you mean more with options where you would only lose the option cost on one side and gain full market move on the other?

[farming101]

Profits? See Blackpowder's post.

Among accounts that are profitable, 10's of thousands would certainly not be out of the question for a sizeable hedge.

[farmaholic]

Profits? See Blackpowder's post.

Among accounts that are profitable, 10's of thousands would certainly not be out of the question for a sizeable hedge.

Thank you.

I guess we'd each have to assess our risk tolerance.