Authors : Karel Malec, Mansoor Maitah and Elena Kuzmenko
Abstract: The future trading represents interesting possibility how to trade commodities. Each commodity and related futures contract has its own characters which can be advantages or disadvantages for successful trading. The spread trading can be used as appropriate tool for traders with budget constraint how to avoid the volatility. The study is focused on spread trading which are compound from two consecutive contract months of futures for wheat. The aim of this study is to analyze the spread consisting of May and March contract and suggest a strategy focused on small conservative trader and also offer some insight to spread trading and introduce it as the way of trading which can be useful for smaller traders with low budgets. For this purpose, there were analyzed all possible spreads for the stated commodity traded at Chicago Board of Trade (CBOT). The developed strategy is based on the contango phenomenon and uses tools of technical analysis moving averages to determine when to open the position. Positions are finish near to first notice day (at CBOT) for contract which expire sooner or with using stop-loss. The suggested strategy brought positive results. There are only two losses during the observed period.
Karel Malec, Mansoor Maitah and Elena Kuzmenko, 2015. Analysis of the Wheat Futures Spread Trading. Research Journal of Applied Sciences, 10: 235-240.