The Market Project
The market project aims to explore the commodity markets and the
role they play in the metals and fuels markets. Each member of the
class is given $500,000 in virtual cash. With this cash you can
play the market as hedgers, speculators, or arbitrageurs. You may
also decide to operate as a supplier of a commodity or a
fabricator consuming a commodity and work with forward contracts.
The goal of our activity to is keep track of selected metals and
fuels markets until the end of the term. You may pool your funds
with others in the class to form partnerships. We also wish to use
this activity to better understand the factors that influence the
market.
On Friday, Februay 10, we will spend the class in the
computer lab, Cramer Hall 1. There are several websites you may
wish to explore as you make your decision on how to invest:
Three USGS sites that tracks minerals
http://minerals.usgs.gov/minerals/index.html
http://minerals.usgs.gov/minerals/pubs/commodity/
Energy Information Agency which tracks fuels
www.eia.doe.gov
Commotodites Futures Trading Commission site
www.cftc.gov
You may find the following CFTC site interesting
http://www.cftc.gov/ConsumerProtection/EducationCenter/index.htm
These sites describe futures trading and are associated with
trading floors:
The National Futures Association has an education page:
http://www.nfa.futures.org/investor/OppRisk.asp
The Chicago Mercantile Exchange began with agricultural commodities, and now trades a wide range futures
The London Metals Exchange, as its name suggests, is a futures market of metals, as well as plastics:
Tracking news related to your commodity portfolio is an important
aspect of this project. You may wish to consult the Financial
Times several times each week. This may be done from any
campus computer lab. You may also take a FREE trial subscription
to the FT. (Remember to cancel this after four weeks, or they will
bill you with some enthusiasm!)
News related specifically to commodities can be found at
www.ft.com/markets/commodities
http://markets.ft.com/markets/commodities.asp
You should use search engines to identify sites that track
specific industries that you find to be of possible interest.
PLEASE NOTE: THIS EXERCISE IS RESTRICTED TO METALS AND FUELS.
YOU MAY NOT TRADE STOCKS OF COMPANIES, OR AGRICULTURAL COMMODITIES, TO COMPLETE THIS EXERCISE.
On Friday, February 17 you will decide on your investments and the positions you wish to take with regard to the market. A brief summary of your investments should be turned in at that time (this is not going to be graded, it is a starting point). The summary should include
1. A statement of your initial investments and the market or news source where you will track their prices. Include your reason for taking the inital positions.
2. A history of your commodity’s price movements for the year 2015.
3. A brief statement identifying important events that impacted the price during this period.
These may be obtained from
http://minerals.usgs.gov/minerals/pubs/commodity/
Between February 17 and March 17, you will keep track of the market and how your investments are progressing. You may wish to sell out a commodity and reinvest in another.
You may make as many trades as you see fit to maximize your return on investment.
You must keep a record of the transactions and reasons for making them.
You must also keep track of news that influences the price of
your commodity or commodities.
The final report is due in class on March 17. During the class period on March 17 you should be able to talk about your investment strategies, the news that may have influenced the price of your commodity, the changes to your investments, and your decisions and justification on whether to remain in the market, get out, change commodities, etc.
Your final report will include:
1. Your (corrected) initial investment statement, including
all three items listed above.
2. A history of your commodities' price movements during the four weeks you have tracked your commodities, and a summary of important news events pertaining to your commodities. The is a four week project with ~19 business days. You should have ~19 news items. If you are tracking more than one commodity, then you can restrict your news summary to one commodity. You may also report news for a different commodity each day (eg Iron on Monday, Copper on Tuesday, Crude Oil on Wednesday, etc.) Remember to include specific newspaper citations.
2. A rationale for any trades you have made. This will include the rationale for your initial investment.
3. A statement of your final position, including any profits or losses.
4. A statement identifying what you have learned about commodity prices and short term news events.
5. A statement describing what you would do next, if this project continued another month or more.
The report will be an individually authored, written report
turned in at the end of class.
revised 9 Feb 2017