Wednesday, 19 August 2015

Soybeans are better for you than corn

Those of you interested in a commodity-trading strategy might consider betting on soybeans over corn in coming months.

That’s because the spot soybeans contract is trading for a higher price than comparable contracts expiring in the near future, while just the opposite situation prevails for corn. If these two commodities adhere to the historical pattern, a trader investing in soybean futures will beat the one in corn.

This greater profit would be realized when the contract you hold approaches expiration and you roll it over to the one whose expiration comes next. If that next contract is trading at a lower price, as currently is the case with soybeans, you pocket the difference as profit. But if that contract is trading at a higher price, your so-called “roll return” will be negative.

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