We have welcomed many new BIS Spec Subscribers recently, for those that are new: Click here to read the re-introduction of the BIS Speculative Newsletter.
What we have today is less of an actual trade recommendation, and more of a “hey check these out”. These strategies are particularly customizable, with options strike prices at each penny, grower concerns demanding different strategies, and speculative traders market outlooks varying wildly.
February options are in what we would consider an ideal timeframe – these expire on January 23rd, providing coverage not just through the report, but through the following two weeks of trading as the markets digest any new information. That’s plenty of time, but not SO much time that the options become cost prohibitive. You can also look at Short Dated New Crop options for a February option that trades off Dec. 26 corn and Nov. 26 soybeans.
Feel free to call us at 800.558.3431 and ask for a broker if you have any questions.
Short Corn Recommendation
Entry: Buy 1 February 440 put option, ~5.5¢
Risk Exit: None, total risk is premium paid
Long Corn Recommendation
Entry: Buy 1 December 455 call option, ~4.0¢
Risk Exit: None, total risk is premium paid. We like this higher strike as any bullish surprise causing a break of this level should result in a sustained move higher.
Corn Strangle
If you are not sure which way the market is going to move, but are convinced the market is going to move a lot, buying both a call and a put is a suitable strategy. Choose any two strike prices, this works as follows. If you bought the 440p and 450c for a total of 8¢, as long as the market is more than 8 cents above 445 or below 435, this strategy is profitable. Farther out of the money strikes are less expensive, but your profit window is farther away.
Alternatively you can sell both options, and collect the premium if the market continues to drift sideways.
One of our New Year’s goals is to provide BIS Spec Newsletters on a weekly basis. Feel free to hold us accountable if we fall asleep at the wheel and you are looking for more trade recommendations.
To tease our next recommendation, we are beginning to really like a long rice trade, and will likely be sending out a trade rec on that later this week. Good luck with the report today!
For our pre-report Grain Stocks analysis, click here.
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Disclaimer: The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Brock Investor Services, Inc believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice is based on the opinion of Brock Investor Services, Inc and reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. There is a risk of losses as well as profits when trading futures and options. This brief statement does not disclose all the risk aspects of derivative trading, therefore careful study carrying FCM’s Risk Disclosure is strongly encouraged before the recipient of this email trades.