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Long Cotton butterfly spread and short Soybean Oil calendar spreadSpreadEdge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates. SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week. Watch List This week there are 3 trades that are planned for client and personal accounts. This article will focus on the long Cotton butterfly spread. HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. Technical Analysis Cotton has dropped nearly (22%) since briefly topping the 100 level in early March. As of the Friday close, Cotton is sitting just above the upward trendline that has supported Cotton since October of 2023. CTA Positioning and Momentum The CTA Positioning and Momentum Score is an accurate measure of current momentum and trend-following trader positioning using a (+10 / -10 scale). Momentum and trend following traders represent a large percentage of trading and can move markets significantly higher or lower. Cotton has the minimum (10) CTA positioning score indicating that CTAs also have lots of dry powder to cover shorts and add new longs. Relative Price and Positioning Relative Strength is a momentum oscillator that measures the speed and change of price movements. RSI has a 0 to 100 scale. In addition, Cotton has a Relative Strength Index of 26 which is well below the oversold “30” level. Cotton has gone from “Overbought” to “Oversold” in the past 2 months. I expect Cotton to move back towards the middle of the range over the next several weeks. Spread Chart To trade Cotton, I will buy December, March, and May butterfly spread. The optimal entry is Friday April 26 based on the past 15 years of historical data.
For a video of this trade. Use coupon code “SpreadEdge” and get the Weekly Newsletter and Daily Alerts for $1 for the first month. Purchase a 4 video training series with over 3 hours of content. For a FREE eBook about the SpreadEdge seasonal spread strategy. More Information The SpreadEdge Weekly Newsletter is published every weekend and provides a broad overview of the important seasonal, technical, and fundamental indicators within the Energy, Grains, Meats, Softs, Metals and Currency markets. In addition, spread trade recommendations and follow-up on open trades is also provided. For a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com Darren Carlat SpreadEdge Capital, LLC (214) 636-3133 Darren@SpreadEdgeCapital.com Disclaimer SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation. On the date of publication, Darren Carlat did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. |
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