Trade # 1: Calendar Spread in Corn
We have noticed an exceptionally large discrepancy between the July 2019 and September 2019 contracts in the various corn contracts. Currently, the price difference between the two contracts is -20.5. Usually, the average difference between two adjacent contracts is -6:
You can see very clearly that the level of -20 has been reached very rarely.
In the following picture you can see the different contracts with their respective prices and the discrepancy stands out clearly:
Profit target of the trade: $1,450
We strongly assume that this so-called calendar spread will reach the long term average of -6 and therefore we have decided to buy this spread at -20. This means we are selling the July '19 contract while buying the September '19 contract.
Overall, we have bought this spread twice. Should we reach our take profit of -6, we will make a profit of $1,450 (1.45% return on our overall account size and 483% return on the deposited capital for this trade of $300).
If you are confused about the above SLD and 20 1/2, it should be said that it is exactly the same if you buy -20 1/2 or sell for 20 1/2.
How do I learn to trade Calendar Spreads?
This way of trading is part of our futures trading training that starts at Tradimo this summer. In the meantime, premium members will receive interactive instructional talks in the premium community and during live premium webinars.
Disclaimer: This article was written for educational purposes and does not constitute financial advice. Please yourself or seek independent professional advice. Your own trading is always at your own risk.