RULES OF THE GAME: You are a speculator whose objective is to make money by trading futures. You can only speculate in one market for the remainder of the semester. You may choose either Corn(JUL15) , Wheat (JUL15 contract), or Soybeans (JUL15 contract) You must initiate an order and take a position in the futures market by midnight of Tuesday, March 31, 2015. You may choose to first either buy or sell a futures contract based on your price expectations. For instance, if you choose to speculate in corn, you would buy a futures contract first if you think that the price will be going up over the next 3 to 4 weeks. Alternatively, you would sell a futures contract first if you think the price will be going down. The goal is to make money by either first buying low, then selling high, or by first selling high, then buying low! Failure to take a position in the market by midnight of March 31, 2015 will lead to a 5-point penalty on the assignment. By midnight of Friday, April 24, 2015, you must offset your original position for a “round turn”. Recognize that this is the last possible day to offset your position, but you can choose to offset your position at any time following the day of your initial trade. Failure to offset your position results in a 5-point penalty and we will offset your position for you. This assignment can be done individually or with a partner. If this assignment is done individually, at least one round turn is required, but you may complete up to three round turns. If this assignment is done with a partner, then the Partnership must decide which one commodity to trade and each partner must individually perform at least one round turn on his/her own D2L account. However, the Partnership may complete up to four round turns. If each partner does not individually trade, then the Partnership will be assessed a 5-point non-compliance penalty. See “Contract for Partnership: Assignment #2” if you plan to do this assignment with a partner. There is a $25 broker fee for each “round turn” (buy/sell combination) completed. However, you may not begin a new round turn until you have closed your first one and you must have at least one trading day between your opening trade and your closing trade. You are only trading one (1) contract; All trades are based on the settlement price of the day the trade is initiated, regardless of the time of day you actually make the trade. For instance, if you make a trade on Friday, March 27, 2015, you will receive the settlement price for Friday, March 27, 2015. However, if you make a trade over the weekend, you will also receive Friday’s settlement price. FYI – markets are closed on Good Friday, so if you trade April 3-5, you will receive the settlement price for Thursday, April 2. This assignment requires a written document, 3-5 pages in length, including your graph and a reference sheet. That leaves 1-3 pages for written text. The written document must contain the following information: Describe your game plan when you initiated your first trade. In your discussion, be sure to address: Why you decided on a particular commodity (corn, wheat, or soybeans) to pursue How you decided which side of the market to be on first (buy or sell) What was the trend in futures prices prior to your transaction? Your trend should cover at least one month prior to when this project started. Make sure you are specific and provide price ranges and dates for the trend. Provide an original, graphical representation of the settlement price (e.g., use Quattro Pro or Excel) for your contract from March 24-April 24, regardless of when you initiate trades. Do not cut and paste a chart from the internet and submit it as your own. Use computer software to graph prices on the vertical axis and dates on the horizontal axis. Use a line, not a bar graph. Based on your chart, use economic analysis to explain two significant price movements/fluctuations you observed during the trading period. What were the important factors underlying the price fluctuations? For instance, if the futures contract price had been increasing and suddenly started decreasing, what economic factor(s) accounted for this? Discuss an actual, researched, specific event(s) that occurred in the market on this day that could have caused the price fluctuation. Clearly explain which side of the market was impacted – supply, demand, or both, and how the market was impacted (e.g., what happened to price?). Clearly indicate the date or time period you are addressing. NOTE: you are explaining why price changed on a specific day, not why prices have been high or low in this market. You will have to do research to answer the above questions and to explain what factors led to the price fluctuation. You will likely find useful information on your market on the exchange sites,,, in the Wall Street Journal, etc. Calculate and discuss your profits and losses. Did you win or lose money? Discuss whether or not the market behaved as you expected or if something unexpected happened. To earn full credit, also you must discuss how you calculated your profit/loss; don’t forget the $25 broker fee for each round turn you make. If you are trading as a PARTNERSHIP, the roundturn(s) of each partner must be discussed and the overall Partnership Profit would be the sum of each partner’s profit. Overall Professionalism: 5 points: proper use of citations 5 points: proper use of references, including a reference list 10 points for overall quality of the paper, including professionalism (for instance, a title page, proofreading, page numbers, layout, excellent graphic, and overall effort)

I settled on trading in the corn market due to its unique uses and minimal, well predictable price variations. Corn is a domestic crop planted in the United States of America mainly used for the production of oil and consumption by livestock. This crop is planted for both domestic consumption and for export purposes, however on export to some African states it is widely used for local consumption. The two major uses, livestock feed and corn oil production, determine its production to be done in large scale. Ever wondered on the same plant having varying output? There is a simple basic reason for all this, genetic modification. Through intellectual and committed research on the various means of production, the results have been so appealing and pleasing to the farmers. Depending on the prevailing weather conditions, the altitude and longitude of the farming land, the local soil structure and even the ability to use various inputs in the production process the scientists have developed a unique specific brand of corn for that environment. It is as a result of this that the corn prices over time happen to shift. Shifting of the corn prices has resulted in more profit, to good timing farmers and those who have employed modern farming techniques hence increased their produce and lesser profits to the farmers who are still stuck in the old ways of cultivation and production of corn.
As a consequence we have experienced fluctuation of corn prices and hence influencing future prices. To make a kill in the futures market, it not only necessary to know the periods of harvest and the planting and harvesting seasons of the land but also determine how many greenhouse farmers are yet to harvest and whether any of them held their crops for a low season so as to sale them.
Future markets are markets in which an individual either buys or sells a future now with an expectation of prices increasing or reducing so as to sell the produce in future and generate cash inflow. Timing is the key component in markets transaction processes. In a day prices can fluctuate to a range of $3, it is hence critical to have the best timing and do the sell when it is most appropriate, a second can differentiate between massive profits or massive losses. With this in mind, it is prudent to sell on 31st March, when the prices are at $4.02 and state a volume of 500,000, while considering the length of time that will elapse before the next purchase. As a result it is prudent to buy the futures in the near future before selling them out when prices get up, though this is not foreseen. From the general trend in the prices for the past one year as indicated in the graph below means generally the prices are going down. For instance between January 15th to February 15th the prices had fluctuated from $3.81 to $3.79. There is a negative trend in prices hence a sell is better. However, on some strategic days it is important to buy then sell, on the same day depending on the price levels of the product but this is the best deal for the season to sell.
dates prices
February 28th 2014 4.35
march 31st 2014 4.52
April 30th 2014 4.71
May 31st 2014 4.71
June 30th 2014 4.5
July 31st 2014 4.06
August 31st 2014 3.63
September 30th 2014 3.48
October 31st 2014 3.56
November 30th 2014 3.58
December 31st 2014 3.78
January 31st 2015 3.81
February 15th 2015 3.79

On 13th April, I will buy the futures when the prices have fallen to $3.69 and a volume of 500,000
On April 15th, I will sell the future when the prices have risen to $3.83 and a volume of 380,000
On April 24th, I will buy the futures when the prices have fallen to $3.68 and a volume of 500,000
Current market prices line graph
date price
March 24th 2015 4.0125
March 25th 2015 4.03
March 26th 2015 3.9925
March 27th 2015 3.99
March 30th 2015 4.025
April 1st 2015 3.8725
April 9th 2015 3.8575
April 10th 2015 3.8475
April 13th 2015 3.78
April 14th 2015 3.81
April 15th 2015 3.83
April 16th 2015 3.8325
April 17th 2015 3.7675
April 24th 2015 3.6975

Between 13th April and 15th April, there was a sudden shift in the loan rates in the market, this resulted in an increase in the cost of funding the loans as a consequence immediately increasing the prices of corn. The increase in loan rates resulted in a decline in the amount of stocks being traded and hence a further increase in prices on 14th April 2015.
Future price levels
dates prices volumes
May-15 3.61 59000
Jul-15 3.64 130000
Sep-15 3.72 22000
Dec-15 3.82 38000
Mar-16 3.93 2900
May-16 4.2 1147

Over time it is believed with the increase in population and climatic changes, the demand of corn is going to surpass the current supply levels, hence may lead in an increase in corn prices. The climatic changes are foreseen to be unfavorable for corn growing and hence a reduction in the amount of supply in the market. This will see a general trend in increasing the price levels in the future.

Profit or Loss Statement
Income Generated
31st March 2010000
15th April 1723500
Total Income 3733500
Expenses Incurred
13th April 1845000
24th April 1840000
Total Expenses 3685000
Profits Generated 48500
LESS: Brokerage Fees 100
Net Profit Generated 48400

With the trade in place I happen to have made a profit. The market prices trended as I had expected. Generally, I expected a decline in the prices overtime, implying that the best time was required to ensure income is generated. The second sale had lower volumes than the first one due to the prediction of reduced demand in the market that would have resulted in lower revenue generated.