Once again Cinderella is placing her trades to respond to the spike in demand for pumpkin futures. In response to the anticipated inflated pumpkin prices at this time of the year, Cinderella is planning her trading strategy to capitalize on this market.
Cinderella is long known for her use of and ability to use pumpkins in many different ways, making her a valuable analyst for this futures market. Every year she is called upon to share her insights and we are lucky enough to share them with you.
LONG BIAS
Normal pricing for this time of year incorporates the increased demand for pumpkins related to the increase in pumpkin carving and pie baking, yet supply remains the same. As with all commodities, prices are likely to increase when demand goes up and supply remains the same. So, for traders of pumpkin futures, they should anticipate this reaction by placing their trades on the long side.
DOUBLE DIP
What many don’t realise is that the dates of thanksgiving in Canada and the U.S. are in fact different. Two different celebrations that incorporate the use of pumpkins for decoration and in baking provides two great trading opportunities. With the increase in demand at this time of year, Cinderella has been long pumpkins since September.
EXIT AT MIDNIGHT
Much like Cinderella’s carriage that turns back in to a pumpkin at Midnight, pumpkin futures as well have a limited life and must be exited before expiration. No trader wants to be assigned bushels of pumpkins after Halloween and Thanksgiving. Like any commodity its value is worthless if there is no demand so make sure you have exited your position at midnight.
Liquidity for pumpkin futures remains a concern.
Every trader must be aware of how liquid a contract is. After all, a trader’s goal is always to have the ability to ‘trade’ with someone else. Holding on to the futures contract and having it exercised is seldom the goal. Since pumpkin futures spike around Thanksgiving and Halloween, then drop off for the remainder of the year, this contract is not considered overly liquid. Traders should be aware of the increase in volume around this time of year and be sure not to over pay for their trades only to be left with worthless contracts after Thanksgiving. Pumpkin futures can be an exciting market but there are complexities that must be known to trade successfully.
Cinderella and Sarah Potter of www.shecantrade.com wishes everyone a Happy Halloween and Happy Thanksgiving.
WEBINAR
Unlike this fictional story, Sarah Potter is a real trader of Futures and Options. She will be speaking as a guest host in an upcoming TraderPlanet free webinar. She will be discussing Trading Opportunities for the Part Time Trader. Join Sarah November 14th, at 4:30 EST for her free live event.
Sign up for this free webinar here.
