Back In August (in the post titled “The short on wheat corn spreads… Sounds exotic?”) I described my idea of taking a position that would yield profit as the spread between wheat and corn prices decreases. As a reminder, placed an order on Wheat Corn Spreads Dec-18 Dec-18 with the spread value at 187 USD. I also suggested closing the position when the price difference reaches 120 USD.
What happened later?
In October, I changed Wheat Corn Spreads Dec-18 Dec-18 to Wheat Corn Spreads Mar-19 Mar-19, because the expiry date was coming, and the price difference for the further contract was even better. Currently (according to closing prices from February 15) Wheat Corn Spreads Mar-19 Mar-19 is quoted at 128.75 USD and although this is higher than I assumed it would be, I would still advise to close the position, due to the upcoming expiry date. Moreover, subsequent contracts (May-19 May-19, Sep-19 Sep-19) are quoted lower than the currently opened one, so in the case of short, rolling wouldn’t be beneficial
What is most important here is that the profit from the position is already satisfactory. Closing 1 contract at the current price will yield a profit of 2912.5 USD (2884.66 USD after cost deduction). The deposit (maint.) was 1950 USD. Therefore, the rate of return on the investment will reach 134% over a 6-month period.