• Point Value: 150 points
• Groups of two or three
• Trading occurs between 09/09/13 – 11/15/13
• Reports are due by 5:00 PM on Thursday, November 21, 2013
• Responsible TA:
Anders Van Sandt will be your key contact for questions and issues relating to the StockTrak project, and how to use the website.
- To acquaint you with sources of market and price information available for farm products.
- To assist you in understanding the role and operation of agricultural commodity markets.
- To give you practical experience in commodity market trading.
- For the student to apply the concepts and tools presented in the course to identify logical chains of causes and effects determining price changes in agricultural commodity markets.
II. COMMODITIES AND PRICES USED IN THIS TERM PROJECT:
For this term project you may trade any of the futures contracts listed on the StockTrak page; however, you will have to do an analysis of your transactions, so it is recommended that you trade in commodities for which you can find information and for which you have an interest.
III. SIMULATION PROJECT REQUIREMENTS:
A. General Requirements:
You will want to approach the trading with the objective of making the greatest amount of money since this is the objective of speculators in the market. However, remember that the objective of the project is for you to learn about the role and operation of agricultural commodity markets. The focus of the evaluation of your term project will be on your analysis of the markets. Extra credit will be given out to the top five teams who make the greatest amount of money, and made at least 10 trades.
B. Specific Requirements:
1. Trade in ALL available commodities, but at least 6 trades must be in agricultural commodities. (See the “Trading Instructions” listed below to determine how to go about trading.) Your final report will include all the trades that you made during the semester.
2. Prior to entering a trade, research the commodity so you can justify why you entered into that particular trade. You will want to maintain a journal of articles used for research (WSJ, popular press articles, etc.) for the final report.
3. For each trade, present a fundamental analysis in this form: Ex ante analysis: where you explain the reasons why you made the trade. Be sure to relate national and international events that lead you to make the trade you did. Ex post analysis: explain what happened to the commodity price after you purchased/sold the contract. Did prices move in the direction you were expecting? If not, what happened? Explain.
4. Always start your fundamental analysis with verifiable facts, and appropriately reference the sources. Once you have laid out the facts, you can start explaining how you interpret them (how you expect these facts to influence prices). If you do not include at least one verifiable fact, the trade will not count. Do not reference what your uncle John has told you about the commodity markets. It does not count.
C. Written Reports:
The written report should be 5-6 pages in length (excluding title page, list of trades, any tables and/or charts, and references). The format for the written report: (double-spaced, typewritten, font size 12, margins of 1 inch, Times New Roman, Align Left):
a. Title page
b. Body of paper (please use headings)
The reasons why you entered into that particular trade; be sure and relate national and international events to the expected changes in prices of your futures contracts and thus to the expected profits.
Did you make or lose money, what did you think of your experience speculating in the futures market, etc.
c. Reference page
1) Use MLA guidelines (for examples, see the following webpage: http://www.aresearchguide.com/12biblio.html
1) List of trades including:
a. commodity (i.e., December 2017 Corn)
b. dates bought and sold
d. prices bought and sold
e. amount gained or lost
2) Charts/Graphs (optional)
This project will be graded as follows:
a. Title page (5 points)
b. Write a summary of your trading experiences
i. Market & Economic Analysis (80 points)
ii. Grammar (20 points)
c. Reference page (25 points)
d. Appendix (20 points)
IV. TRADING INSTRUCTIONS:
1. Your group will have a common password and account number. As instructor, I will have access to your trades and will be able to monitor your progress through the game.
2. You are required to make a minimum of ten round turns. (NOTE: This means that you must make at least five buy and five sell decisions.) The purchase or sale of two contracts of corn on a certain day is one, not two, decisions. Trade as often as you like; five is just the minimum; the more you trade, the more comfortable you will become with futures contracts. You are to close all trades by November 8th (i.e., you will offset all contracts).
3. You may start trading on September 4th and all trades must be completed by
4. You will have an initial capital level of $500,000 for trading. Out of this capital base you must pay commissions, post margin, and cover any losses.
5. You are not allowed to buy more capital. You may hold up to 25% of your initial endowment in any one commodity.
6. You are NOT allowed to day trade for more than half of your trades, and if you are not familiar with markets, you may not want to trade with this strategy.
7. Keep a record of all of your transactions for your personal use as you will be asked to report your trades in your written report.
You are free to trade in any of the futures contracts or options, and you may use limit orders, stop-loss orders, or spread orders, however, you are on your own for these. You are NOT allowed to trade STOCK, BONDS, and MUTUAL FUNDS.