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I think almost every producer is looking at the recent rally in both corn and soybeans with a lot of gratitude, optimism, and with a fair bit of concern that these new found prices could vanish.
For this reason we are sharing a short corn and bean strategy that can be used by hedgers as well as speculators.
The options discussed below both trade off of new crop futures, Dec. Corn and Nov. beans, and function as a new crop hedge. The May SDNC options expire on 4/24, providing a floor for the next 36 days, and importantly through the March Grain Stocks and Prospective Plantings reports on March 31. With the potential for a massive surprise, particularly in acres, these serve as good insurance.
There are several other tenor options, for both old and new crop, so if you would like to discuss a specific strategy reach out to your broker. Please also be sure to see the alternative short corn strategy.
Short Corn Recommendation
Order: Buy 2 May Short dated new crop $4.80 puts. Currently cost ~9.5¢
Alternative: Short Dec. futures, exit on a close over $5, or work a straight stop around $5.00 GTC.
Target: Break even on the trade is expiration at ~$4.70 (strike – cost)
Risk Exit: We would consider selling these if Dec. futures close over $5 in the near term. Risk is premium paid.
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Short Soybean Recommendation
Order: Buy 1 May Short dated new crop $11.40 puts. Currently cost ~19¢
Target: Break even on the trade is expiration at ~$11.20 (strike – cost)
Risk Exit: We would consider selling these if Nov. futures close over $11.75 in the near term. Risk is premium paid.
Graphic:
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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.