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SPREADS TRADING
Prepared by Ira Epstein & Company
Intercurrency Spreads
SWISS FRANC/JAPANESE YEN
The recent strength in the U.S. Dollar has degraded the Japanese Yen. From a technical perspective, I believe the yen's trend remains bearish and rallies should sold. On the other hand, I believe the Swiss Franc should be considered the cornerstone of Continental Europe's currencies. I am recommending a spread long the Swiss Franc and short the yen at current levels. I would use a stop below 2125.
LONG SWISS FRANC/SHORT D- MARK
Since the beginning of this year the price range of this spread has been about 400 points. Since the middle of February the Swiss Franc has been trading at a premium in price to the D-mark by as few as 920 points to a high of 1300 points. At this point in time I would recommend entering this trade with a stop below 1130.
Seasonal Favorites
CATTLE SPREADS
The contract that is closest in time determines the type of spread; long October versus short April is considered to be a bull spread. The spread appears to me to be widening. I am recommending entry at 575 points, or higher premium to the April cattle with a suggested stop of 150 points.
LONG MAY SOYBEANS/SHORT NOVEMBER SOYBEANS
If you enter this trade I would recommend a stop below 15 cents.
LONG SEPTEMBER SOYBEANS/
SHORT JANUARY SOYBEANS
A stop below 22 cents is suggested.
Basic Bull Grain Spreads
LONG DECEMBER WHEAT/SHORT MARCH WHEAT
Stop below 13 cents.
LONG DECEMBER CORN/SHORT MARCH CORN
The “Professional Farmers of America Midwest Crop Tour” (which is still going on) initially put yield range estimates at about 140 to 165 bushels per acre, however, current figures are running approximately 75 to 100 bushels per acre. Keeping in mind that these estimates only reflect two (Illinois and Indiana) of the seven states being surveyed and the inability of the “bears” to break this market leads me to believe that this is an excellent time to initiate new trades. “Bull spreading” this market, using a 4- to 5-cent stop makes this, in my opinion a good trade recommendation.
August 20, 1997 Paul Kocelko
Ira Epstein & Company
223 West Jackson, 7th Floor, Chicago, Illinois
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Last updated on 08-22-97
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