For those of you following along you know that we believe the old crop corn fundamentals are strong enough to support corn futures from current price levels. Despite the aggressive selloff on Monday, our outlook has not changed. We look at it as a cheaper entry.
If you are following along you know that we are already long two June 480 calls, which trade off the July and expire on 5/23. Those aren’t looking too hot at the moment, but we are certainly glad that we chose the option strategy over futures as it has limited out losses.
This time around the entry position and price favors long futures over options. July corn is trading within a few cents of its lowest prices since December, they have sold off over 40¢ since peaking in mid April, and our exit is very nearby and clear. Because we are so close to our exit, we will extend our usual trading quantity from 2 contracts to 3 contracts. Additionally, it seems with planting progress so ideal and a lack of bullish news of late, July has taken the brunt of the beating meant mostly for new crop contracts.
Long Corn Recommendation
Entry: Buy 3 July corn futures at the market (currently $4.56)
Alternative Strategies: 470 call for ~4¢.
Target: Initially $4.90. Return to $5.00-$5.15 certainly possible. But we are mainly buying here because we think it is done going down, not because we are confident in how high it might go.
Risk Exit: Exit on a close under $4.50. Alternative: 449 straight stop, good till cancel.
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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.