Heat Wave - Commodity Strategy

Cedar Asset Management LLC has recognized the growth in Managed Futures and works with investors of all sizes to find the appropriate manager and strategy for their investment goals.

Chicago, IL (prHWY.com) July 28, 2012 - The heat wave that has been sweltering most of the country of the past few weeks has made 2012 the warmest year to date since records have been taken. The heat has affected many different parts of the county in different ways. Colorado has seen its largest forest fires in history destroying hundreds of thousands of acres in multiple states. The Midwest has not only been hot but there has been a lack of rain. These two words mean one bad thing, a horrible season for Midwest farmers.

The corn crop has not been this bad since the 80's. The U.S. is the largest supplier of corn in the world and one of the worst draughts and heat waves in recent history has occurred during the largest year for demand in world history. Market strategist at Cedar Asset Management predict that corn will reach $8.00 a bushel by December. Corn is used as a byproduct for many other food products. We are not just looking at an increase in the price of corn but every food product that uses corn or one of its byproducts. This rise in corn prices could have an effect on a number of stocks. However investors do have the opportunity to profit from a rise in corn prices.

One commodity strategy to take advantage of the price of corn is to trade a corn related stock. The problem with trading a corn related stock is that the price of stock is not specifically dependent upon the price of a product they deal in. Another commodity strategy to take advantage of the price of corn isto trade corn in the futures market. One futures strategy that could be used to profit from a rise in the price of corn would be to purchase an option. Another futures strategy to is buying a futures contract. Purchasing a futures contract does carry more risk than purchasing an option but also gives the trader the opportunity for higher profit. An option does not have a limited amount of profit but do have to reach an exercise price. Options also have to be purchased which requires a premium where as a futures contract requires margin to be put into an account but does not leave your account unless the position moves against the trader. An investor could choose a professional or a CTA (Commodity Trading Advisor) which is a commodity trading company that can be referred to as managed futures. A commodity trading company or CTA can trade a number of different commodities. An investor could find a manager whose strategy involves the grains to get exposure to the rise in corn prices. By choosing managed futures investors do not need to place trades, monitor trades, or take call from brokers and make trading decisions. Managed futures provide investors access to the futures market without the necessary expertise needed to trade successfully in the futures market. The majority of people trading in the futures market have little to no experience and lose money. The futures market is higher risk than traditional markets such as equities and bonds. Managed Futures do have requirements such as account minimums and some require investors to be qualified eligible participants. The majority of CTA programs are available to investors with a $250,000 investment portfolio. Investors should allocate 5-20% of their overall portfolio, because there is higher risk it should only be a small portion of a portfolio.

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Tag Words: commodity trading, commodity strategy, futures strategy

Categories: Business

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