9/28/20 and 9/29/20 were inconsequential price moves terminating near but below the 8ema. Then on Wed 9/30/20 my lack of attention to the USDA report schedule was equivalent to stepping on a landmine. The Grain Stocks report at 12:00pm ET (https://usda.library.cornell.edu/concern/publications/xg94hp534) moved Dec Wheat price up like it stepped on a Claymore.
If you've been following this thread you'll know our stop was 578 1/2. The high for the day was 587. Enough said. Other than paying attention to potentially market moving scheduled news is important.
If I realized this report was a potentially high impact one and was about to be released, I could have taken some protective action, such as:
- Exiting the position.
- Reducing the position size.
- Buying a Call option or spread.
- Sell a Put option spread.
- Taking an opposite position in a different month.
- If trading the ZW contracts we could take a long position in the YW contracts.
And there are probably other hedges.
Frankly, I don't know all of the many Ag reports that represent time bombs and which ones aren't significant. But its time I do the research and find out. I'll post a separate entry on this blog on this subject after I've done the research. Certainly the report mentioned above is on the list. Its roughly quarterly but its not a regular period. Best to check the link above and click on "Release Calendar" and check every month for the Grain Stocks report. I know I will. I looked at the calendar for the next one up through Feb 2021 but its not listed. I'd expect it to be in early January 2021 based on the previous 4th quarter.
So, thanks to my oversight. here's the damage:
Shorted 548 1/4 9/23/20
Covered 579 1/8 9/30/20
548 1/4 - 579 1/8 = 30 7/8 * $10/pt = $-308.75 loss
Glad we used the mini-contract. The full size ZW contract would have been much worse:
30 7/8 * $50/pt = $-1,543.75
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