Trading The USDA WASDE Report

A monthly report released by the United State Department of Agriculture (USDA) titled the World Agricultural Supply and Demand Estimates (WASDE) provides the current USDA forecasts of US and world supply-use balances of major grains, soybeans and products, and cotton, as well as the US supply and use of sugar and livestock products. This report usually causes a massive move in the Ags markets, like corn and soybeans.

Darrell Martin wrote about a trade to remember, referring to “The Ags Reports,” two years ago and gave traders a heads up reminder when the reports were released on January 12, 2016. Martin warned that being directional was very dangerous. Traders, who were paying attention or remembered what happened in the markets when these reports are released, reaped the benefits of the massive movement.

This first image shows the massive movement in both the corn and the soybeans markets.
To view a larger image click HERE.

Straddle Trades
Having a good idea of what the market would likely do, Martin placed a straddle trade on each market. The straddle strategy uses Nadex spreads and involves buying an upper spread and selling a lower spread.

Corn

Martin sold 20 contracts of the 330.0 - 350.0 corn spread at 346.8 and simultaneously bought 20 contracts of the 350.0 - 370.0 corn spread at 353.5. Notice how the ceiling of the sold spread and the floor of the bought spread are the same at 350.0. The indicative index on the underlying market was currently at 349.75.

Soy Beans

For the straddle on Soybeans, Martin again working with 20 contracts sold the 820.0 - 860.0 spread for 853.2 and bought 20 contracts of the 860.0 - 900.0 spread at 865.0. The current indicative for soybeans was 857.98. Moments of panic may hit you if you pay attention to the profit/loss column. However, you have to realize this is for 20 contracts and includes the bid/offer spread. (Learn more see Understanding Entry Price Difference.)

The Trade Played Out
As the trade played out its massive moves over the next 30 minutes, the straddles performed as they were supposed to do: one side profits covering the loss of the other side.

You can see that the sold side of both straddles lost because the market spiked up. However, the bought side more than covered the losing side. Not including fees, these combined trades made $2085 in less than 30 minutes.

This is just another example of how paying attention to news can pay off in your trading day. To learn more about trading news reports using Nadex binary options and spreads, as well as futures, forex and CFD’s, go to www.apexinvesting.com.