cancel
Showing results for 
Search instead for 
Did you mean: 
Contributor

Re: From the floor April 26 - (Limit increase)

Mike - I do NOT like this idea, rumor or pit chit-chat that the CME might raise the limit on corn futures from 30 to 50 cents. It is a bad idea, because it only helps these huge funds drive prices to the extreme edge of the limits. It will wipe out the small traders faster, and for whose gain? Individual small speculators are what drive these markets. If all of us are gone, and just a few huge funds are left, with expanded limits, then what has been gained? Liquidity? Not in my opinion. Horrible idea. I am vehemently opposed to all of these huge funds being in the grain markets to begin with. There is almost no chance of making any money anymore...long or short. When these funds make a move, it wipes you out faster with almost zero chance to reverse your position. No doubt the CFTC will approve expanded limits, but who said these government leaches know what is best for the overall futures markets? Kill this idea.  

0 Kudos
Senior Contributor

Re: From the floor April 26 - (Limit increase)

I've often thought the limits should be expressed as a percent. When the .30 limit was introduced corn was trading around $2 or 15%. At today's corn price that is less than 5%. The proposed increase to .50 would still be below 10% of today's price. So yes I think it should be changed but instead of a fixed number why not make it 10%?

0 Kudos
Veteran Advisor

Re: From the floor April 26 - (Limit increase)

jrw,

 

I think you bring up a good point. This might support further the idea of a two-tiered market. One that has the futures price even wider from the cash market. This idea was spelled out in the March or mid-March Successful Farming magazine. Going forward, the funds control the futures market, the cash market will not be able to keep up. Thus, a two-tiered market.

 

Mike

------

0 Kudos
Veteran Advisor

Re: Third slowest corn planting pace ever recorded.

Oh c'mon Jason, you ordered this stuff and we know it. We know of your connections.

 

Mike

0 Kudos
Veteran Advisor

Re: From the floor April 26 - (Limit increase)

One trader says he agrees with you, SoutWestOhio. He feels like the daily limit should always be 10% of the underlying. He sees the same problem with the soybean market. At $5.00, the bean market traded a 50-cent limit. Beans are now trading way over $13.00 and the limit is only 70¢.


Meanwhile, a corn pit trader doesn't think a higher limit will matter. He says, "I really don't think a small increase would change 'limit-up' days. If the market is bullish and if it overreacts it will lock, whether 30, 45, or 50. Now, if the CME changed the limit to dollar, maybe that would make a difference, because then a thought process will enter in. A lot of times we come off limit moves because of over reaction. The change would be healthy to accurately absorb news and help the market methodically trade or trend higher."

 

Mike

0 Kudos
Veteran Advisor

Re: From the floor April 26 - (Limit increase)

jrw,


One of my contacts just sent me this note:


I just received a call from the CME and yes they will be putting out an official press release soon regarding
1.      The increase in corn daily limits to 50 cents.
2.      And removing all limits on options.

He says, "Again, I think this is not good for the commercials (which are now the minority player in the markets)."

 

Mike

0 Kudos
Senior Contributor

Re: From the floor April 26 - (Limit increase)

Poor commercials..... They shoved these market around for years....... To bad now the shoes on the other foot.....I for one am not to worried about commercials....... They are big boys they can take it....... p-oed

0 Kudos
Senior Contributor

Re: From the floor April 26 - (Limit increase)

Wow one person agrees with me. You made my day!!!

0 Kudos
Veteran Advisor

Re: From the floor April 26

Does anyone know who is pushing the CME for the change in limits?  

 

Starting to look to me that some traders were planning on pushing up the grains until mid-April(maybe that is what their charts or seasonals or GS said to do) and then cash in on a correction.  Everytime they try that short move, the weather gets in their way of making money.    They need to cash in and the four letter words (heat , cold, and rain) aren't cooperating.  We would have had a good correction this week if the rain and cold had stayed away.    So who are we changing the rules for....and why?  Let me guess....they want to attract more money.

 

I am kind of old fashion, but I don't see the reason the market needs to move any faster than it does now.  Wilder margin calls would hurt the grain buyers ability to allow us farmers to forward contract grain....they do have limits on those lines of credit.   

 

Must be alot of young blood running things these days.  People have far more money to spend on non-essentials that we would of ever dreamed up 30-40 years ago...and they think the sky is falling. 

 

 

 

 

 

 

 

0 Kudos
Veteran Advisor

Re: From the floor April 26

I had a nice visit with a longtime floor trader. He disagrees with the increased limit consideration. Like you, jec22, he thinks this just raises the price for farmers trying to use the available marketing tools. It increases the costs for elevators to participate. It is an effort to accomplish more trades, higher volume. And that is already being accomplished in the options and spreads markets. Plus, he asks where do you put the soybean limit, if you raise corn's limit. And what about wheat? Where do you stop? Is this going to help with convergence of the futures and cash prices? The other thing the floor trader mentioned was the boost in daily limits could give the funds further control of the futures market.

 

Mike

 

 

0 Kudos