Hey Everyone,
I am a Merchandiser (handle grain purchasing in the US) for a trading company similar to ADM/Bunge/Cargill and I also run risk management for my desk. I also manage a spec account where I get a % of my monthly PNL as a bonus. Does anyone have any info on what the traditional percentage is that I should be receiving on my spec PNL?
not sure about the ags, but at a bank you would expect ~ 5%
Face is correct.
And hedge funds are in between 5 to 20.
Prop firms like FNY is 40, and firms like T3 is between 60 and 90.
Curious, what are your rationales behind your spec trades?
Fundamental, quantative, technical, quantamental?
Holding duration, position sizing? Fly, spread, outright? Trade along the forward curve?
Thanks for the info MXS,
My rationales behind spec trades tend to be fundamental and technically driven. I mostly trade the grains wheat/corn/soybeans/rough rice with some softs as well since I fee likel I have the best fundamental knowledge of these. Most of my positions are either outrights or spreads.
generally trade the spread when it gets out of whack. I also sometimes take delivery of receipts if it comes to full carry and I know I can sell them to mills who are short but this is rare.
Holding duration mostly just depends on technical signals and fundamental news.
Sizing is also up to my own discretion I think the most I have had on at a time is about 750 options and about 75 futures of a single commodity.
This is cool, how did you source the mills?
Sorry @m_1" did not see this till now, I have relationships with mills/elevators since I purchase physical from them for export and also sell them warehouse receipts when they come into play.
Thanks for your answer, man. When you say technically, what do you mostly look at in that aspect? For me, I use technical too but I DON'T overly do it. Like I don't say "Oh the RSI or whatever is trading at this level"... that would be dumb and trading blind. For me, it's usually the skew that may have deviate and I trade for the imbalance to hammer back to a level. Relative value, mean reversion, blah blah...
When you say the spread is out of whack, what do you generally mean by that? Like if a spread blows up? I know the commodities forward curve may have a mean reverting process especially for aggies. How would you confirm that? Maybe how the forward curve played out year after year back or short term reversion play with a hint of fundamentals to confirm your technical view?
75 outright? Pretty sizable, lol. For me at least. I would only dare to put that to hedge something.
I am mostly using technical indicators to support fundamental information. An example of a recent trade was RRK9 futures were trading just below $10.00, futures were incredibly oversold/CCI was starting to push higher/stochastics were crossing over to the upside. At the same time Non-commercials(Specs) had a huge net short position (about 54% of the current open interest.) On farm prices at the same time were about $.65 higher than the cost of futures. So all of this for me was a confirmation to go ahead and put on a long position.
Most of the spreads (really only calendar spreads not necessarily the corn/bean spread etc) are based fully on fundamental knowledge. For example (again in rice) last year the July/Sep spread was trading around $-.285 (Full Carry) while there was very limited supplies and huge demand for US rice. (Funds also had a large net short in this situation as well) Traders who need to buy physical would obviously stand in to take delivery of warehouse receipts at $-.285 while shorts (largely specs) had nothing to deliver against their shorts. This caused the spread to jump to $1.25-$1.50 where longs let the shorts out of their positions.
75 out right was fairly large for me too. Mostly I am in the 10-20 range per contract.
Thanks for sharing. It's nice to gain insight from someone on the commercial side as opposed to someone like me who comes from the financial - prop trading.
tx for sharing mate... have you ever tested your technical signals systematically?
I do backtest on them on my bloomberg terminal and use them based on historical performance.
The hardest part when putting signals into an algo is removing the trader's personality. At the end of the day, algorithms are binary, buy or sell... and that was the hardest part for me. When we're having our traders meeting (cliche), he tells us what he wants in the algo and mind you, he was a pit trader, not electronic at all and we tell him time after time that it's not possible to get it done that way and that's where discretionary comes in...
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