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Trading Commodity Futures and Options in a Student-Managed Fund

Author

Listed:
  • Diersen, Matthew A.
  • Wang, Zhiguang

Abstract

Student-Managed Investment Fund (SMIF) programs and classes often involve the active management of a stock or equity fund. Complementing these is a unique fund, similar to a commodity pool, that invests directly in agriculture futures and options contracts. This paper presents a trading course that is offered where the class proposes and executes trades in the POET Student-Managed Agricultural Commodities Fund, which is owned by the South Dakota State University (SDSU) Foundation. The course objectives are to: (1) enhance market analysis skills, (2) master trading tools and techniques, and (3) advocate for prudent risk management in trading. Trading drills are used to gain competency in a speculative setting that requires detailed understanding of order entry and exit timing, price levels, and various order types. Real trades are considered including buying and selling futures, options, and combinations of agriculture-related contracts in a margin account. While many of the executed trades are “textbook examples” of how trading should work, the nuances provide teachable moments. The curriculum and fund characteristics are described here to inform other programs that may want to consider adopting a similar course.

Suggested Citation

  • Diersen, Matthew A. & Wang, Zhiguang, 2022. "Trading Commodity Futures and Options in a Student-Managed Fund," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(1), March.
    • Handle: RePEc:ags:aaeatr:320044
    DOI: 10.22004/ag.econ.320044
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