Thursday, May 19, 2011

Neutral Nick Update Shell Shocked via commodity price movement

First off I want to wish my wife Happy Anniversay!

As for our MOCK trading character Neutral Nick; he got shell shocked so to speak; as he like many producers has been a little busy; and he found his hedge account not where he wished it to be.

A couple days ago Nick looked at where his hedge account was in regards to profit/loss; before the movements the past several days he was up around $5 million dollars in profits; while yesterday his acount had fallen all the way back to around even; after the drop in volatilty his account today showed gains off about 1.3 million.

So today he was forced to try and get his account back in line with his goal of staying short delta bushels of about 100,000.  The problem he has found is his small project has just exploded.  He went from trading 10 lot increments to trading a couple thousand lot increments when trying to adjust today.

I don't know if a bank in the world would give Nick the type of credit line he might need for his position.  So folks don't try this at home as futures and options are very risky and not suitable for many.

For soybeans Nick sold 775 of the 13.80 puts, 1,000 of the 1300 puts, and 500 of the 15.00 calls.

For wheat Nick sold 2000 of the 8.00 puts, 1,000 of the 7.50 puts, and 820 of the 9.00 calls.

To square his corn position position back to 100,000 bushels sold he sold 2,000 of the 7.00 puts, 1970 of th 7.50 puts, and 300 of the 8.00 calls.

Some quick thoughs on Nick's trades; first no clue how deep some of these trades he is trying to do are; so he probalby has big slippage considering his volume that he is working towards.  The next thought is the mentioned margin requirement.

Below are some screen shots of Nick and his portfollio; for a complete list of his positions send me an email at

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