July Corn Rising - Exit

I've been disappointed by the markets in so many ways over the years but today I was disappointed in a whole new way. Maybe because today's post is number 13 in this thread, or Murphy's Law was being enforced, or the market makers have a secret surveillance camera in my office. Whatever the reason, the probability of this specific outcome was very low, based on the July Wheat and Corn markets past behavior.

As you know, the hedge was a July Put option on Wheat rather than Corn because Wheat has had weaker price action for months. During the duration of this trade Wheat and Corn have had very similar daily moves, and Corn has had more Bullish price action than Wheat.

So, it would be reasonable to assume this behavior would be true today. Therefore, one would expect Corn to retrace faster and higher than Wheat, if indeed there was a retracement. In yesterday's post I said "very often when there's a big move on a given day, the next day sees a retracement". Well, that's exactly what we got.

Except for one thing. The top chart above is the Daily chart for Corn and the bottom chart is for Wheat. Notice how today's Wheat candle retraced further than Corn's.

Well, the strategy was expecting Corn to rise faster than Wheat. If that was true then Corn would have been at higher price when the Wheat Put hedge value dropped back to 13 points, where we bought it. I had entered orders last night to sell the Corn and Hedge contracts when the Hedge hit 13 points.

Since, for the first time, July Wheat moved stronger than Corn, the Corn contract sold at a lower price. Last night the Hedge was worth almost $200 more than the Corn. Is "disappointing" a strong enough word?

Bottom line is we're out. There isn't much time left in the July contracts, and where December commodities go from here is very uncertain, so we're out of Corn and Wheat for now.

Summary:

YW July Exit 638 1/4 - Entry 693 1/2 = -55 1/4 * $10/pt = $-552.50

ZW July 660 Put Exit 12 5/8 - Entry 13 = - 3/8 * $50/pt = $-18.75

YC July Corn Exit 650 1/8 - Entry 689 1/4 = -39.125 * $10/pt = $-391.25

Total $-962.5 Loss.