Trading on Winnipeg

[rook]

I guess you could say one of my New Years resolutions is to open up an account and make some trades. However, I've heard that trading canola options on Winnipeg is a hit-and-miss affair, and the broker I'm considering recommended not trading canola options at all, rather use beans. I'm reluctant to trade beans because of the exchange rate, larger contract sizes, and mostly because I don't follow the bean market.

Do any of you have any thoughts or experiences in any of these areas? Is it a tight relationship between beans and canola?

[TOM4CWB]

Rook;

Patience is a virtue in trading WCE options.

Seldom can I get them the same day, a person usually must put in an order, then wait for the direction of the market to cause a fill on the order.

This usually means if buying a put, the futures must drop, conversly if buying a call a rally is needed.

I normally hold calls for risk management purposes... (not speculation) and therefore hold them to expiry... or if deep enough in the money put on a short position against the call to lock in a profit... then let them expire... an in the money call exercised gives a long position... if a short position is held in the same trading month... the two positions(long and short held at the same time) cancel each other out. If a large enough drop in the futures occurs, the short position can be removed to take a profit... and activate the call upside price potential.

Have fun learning... use the account for risk management... NOT SPECULATION...

Then it will provide a good business opportunity to create more profit through your farm's needs for risk management strategies that stabilise prices... if your marketing plan incorporates a profit analisis and triggers to capture profitable prices!

[TOM4CWB]

Rook;

On the subject of buying bean options... they are VERY imperfect hedges... the volitility in the US Dollar/Cdn. Dollar is a major extra risk... plus Canola can trade very differently through droughts... production risk events in both beans and canola can cause tracking of both prices to be out of kilter...

The big difference in oil content means I have bought Bean oil instead of Beans themselves.... If Bean Meal is the profit centre the Bean Oil can easily be overproduced... while beans and bean meal retain their value.

It can work.... it is more at risk of being a spec position than a hedge...

Again... it is easy to lose your shirt if you speculate.... I hope you can learn the difference and stick to being a hedger!

Funds and day traders have made good money being Specs... but farmers normally make very poor Specs... The CWB is a perfect example!

[boone]

Tom4cwb Two near perfect explanations and posts: Your on a roll. lol

[TOM4CWB]

Boone;

You are too kind... but in the same train of thought;

I understand the APF is allowing a payment of up to $8,000.00 to farmers who hire consultants to put together a risk management strategy for production on their farms...

Charlie, do you know more about this?

Boone I was taught by wise teachers like Brenda Brindle, Ken Stickland... and a sprinkling of many others... through the Farm Business Management Initiative in the 1980's and early 90's... I would say these were some of the best education opportunities any farmers could take to prepare for the realities of the 21st century...

Charlie;

Can you suggest some conmsultant/organisations who can meet the criteria of the new APF risk management program?

Could we get a George Morris Risk Management Course going on line for Agri-ville participants?

I would advise

[TOM4CWB]

Rook;

My Partner and Wife Lucy took many of the courses too;

Her backing and input have been invaluble to making good solid decisions... PLUS keeping marketing plans on their wheels...

It is VERY good to have backup advisers who know what is going on... AND are not afraid to speak up...
To tell us when we are turning into glassy eyed ranting BULLS... the biggest danger of trading futures and Options!

[rook]

Thanks for the input Tom4CWB. I am planning on hedging, so hopefully it works out using WCE. It sounds like one may have to have an open order for a while to lift the hedge and probably can't do it on the same day.

While my wife isn't into this stuff, she may learn it at sometime, if she wants. I don't know if I like that idea - sometimes it's nice not to listen to reason!