<sup>Q: Hello Mr.Howard,
I trade in Soybeans (ECBOT) .

I had a doubt about the coming front month spread (ie., JULY08 - AUG08) which still is trading low and is at +7.00.

Is there any possibility of this coming down in negatives, or will this spread trade in positives only.

Please help me in making out how this spread actually works in coming times as May contract gets expired.

Thanking You,
ADIE J</sup>
 

^{A: Hello Adie J,}

^{The July8 - August8 spread is usually a carry charge spread like the May8-July8, but this year it is inverted because of the tight old crop supply.  I would expect that to take place in the August8-September8 spread.}

^{I look at this spread (July8-August8) on the chart and see good support at July8 +6 cents over, +1 1/2 over, and the low in 2008 is -2 1/2 under. It is reflective of the opinion that beans will be at their tightest supply by July, and good demand that cannot wait for the New crop after September. If the strike continues in Argentina or demand picks up, I would expect this spread to test the 31 cent level that was seen on 2/29/08.}

^{This is a tough spread to trade, as is using the September contract. The September can only be delivered by early planted crops coming from down in the southern states, so it is not considered old or new crop but in between. A popular way to scalp/trade the September is to buy the August. sell 2 September, and buy a November contract. This is a butterfly spread and can be bought or sold as a spread, or you can leg on the spread.}

^{You could start to look at the November8 with any other month up to and including the July9, such as the November8-March9 spread. The July8-November8 old crop/new crop spread is one I cover and follow in Trends In Futures (TIF) and soon I will be talking about the July9-November9 spread. As a matter of fact I have a trade on right now in TIF (subscription service) being long the July8, short the November8. I have recommended trades using the long May8- short July8. Even though you could take my trade recommendations, it is meant for educational purposes to show you how I get a thought and idea, form a plan, and use a strategy that best reflects that. I show how I manage the trade and why, and follow it until exiting the trade. All accounts are not trading the same equity or time frame (some day trade, some long term traders) or risk tolerance, so my recommendations are to help each person to incorperate my trade idea and use as another tool in your shed.}    

^{Consult with your broker to see what is suitable for you. These are my trade ideas and strategies to help educate you as to my trading structure and style. Only you can know what is right for you and your account size, trading style, risk tolerance and so on.}

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Howard Tyllas