An Overwhelming Focus

Discussions about personal psychology for the individual trader.
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cliffg
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An Overwhelming Focus

Post by cliffg » Wed Dec 20, 2006 12:19 am

A HEDGE 'DRAWDOWN'
I grain farm and short hedge crops via incremental selling in rising markets based on profitability. SO, I have sold Minn Wheat from 4.50 up to 5.00 and am out 2.5 years worth of production. There's currently 50k left on the table.
I have funds to go out another 1.5 yrs worth of production, based on a 6.50 top.

The 50k in margin is eating me up mentally. What coulda, shoulda, woulda!! Why didn't I just put our hedge plan on hold for the last 4 months? We carry enough risk in the cash end of things with drought, hail etc that every penny on the futures pricing side is valuable.

And now canola is entering our incremental profit criteria!!!

How can I stop focusing so much on the hedge drawdown??
cliffg

BARLI
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Post by BARLI » Wed Dec 20, 2006 7:45 pm

hi Cliff, dont you sell Wheat in a cash market for a profit though?

cliff wrote
How can I stop focusing so much on the hedge drawdown??
cliffg
I know only one way: stop the pain (ie exit the trade) :wink:

RedRock
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Post by RedRock » Wed Dec 20, 2006 11:55 pm

Paying insurance premiums always 'sucks'... Until you need it. If you want to speculate. Speculate. If your aim was to lock in a profit, mission accomplished.

I knew a guy whose specialty was creative hedging for producers and users. Probably a bit of art along with the formulas. I never asked about his tricks.

Some of the farmers in Iowa did a good bit more than hedging as I recall. When I was just a runner in the grains... One Iowa 'farmer' in particular I recall flying into Chicago to pick up some of his pals from the bean pit to see the Superbowl in (i forget where). He had his own jet. 'farming' (and trading) had been very very good to him... I remember lots of 500000 bushel scale orders.

Good weather to your fields,
rr

cliffg
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Post by cliffg » Thu Dec 21, 2006 12:23 am

RedRock wrote:Paying insurance premiums always 'sucks'... Until you need it. If you want to speculate. Speculate. If your aim was to lock in a profit, mission accomplished. rr
RR,
You're absolutely right. My aim was to lock in a profit, not to speculate. Two totally separate objectives.

I am surprised at how easily I slid into this absurd train of thinking this last while. I used to do hedging for third parties in a management business and had no difficulty sticking to the plan, but it wasn't my money. Different story when it's my cash on the line.

I'm going to get back on track mentally by focusing on the original aim --- profit.

Thanks for your concise comments, they hit the essence of my quandry.
cliff

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