Current Positions
- Long 2 May Cotton Futures from Feb 11 at ~63.96. We casually mentioned taking profits in the last newsletter…hope you didn’t! What a rocket. Just leaving this here as a reminder we sometimes have good ideas.
- May SDNC Put options on Corn and Beans. We will hold for track record, manage as you see fit.
- Short 2 November soybean futures from 4/6 at ~$11.57. Hold ’em if you have ’em, establish if you don’t.
Short Soybean Oil
We have been considering sending a short bean oil rec for a couple of weeks now, and at this point think the timing is right. We will also admit, the war in Iran and its impact on crude, and more importantly diesel prices, is a bit of a wild card. Nothing is ever guaranteed though, and we feel the risk/reward here is attractive.
The primary reason we want to short this market is that this rally has been fueled in large part by aggressive large speculator buying. Large specs set a record net short on 12/23, then bought 223,000 contracts over the next 15 weeks, pushing July futures from 50¢ on the 12/23 to 69¢ today. They were buyers 13 of those 15 weeks, (net sellers of just 106 and 315 contracts the two weeks they didn’t buy), and have been buyers now for 7 consecutive weeks. Outside of soybean oil, large specs are very long meal and soybeans also, putting the entire complex in a compromising position. While there has been no sign that specs are done buying soybean oil, last week they were sellers of both soybeans and soybean meal.
From a technical perspective, 70¢ has been challenged several times and stopped the rally each time. The highest close for the May contract is 69.95¢. July, now the most active, also has been stopped at the 70¢ level. Soybean futures have run into a wall at $11.70-$11.80, and soybean meal ran into a wall at old highs, failing to close over 335 which are the march highs, and failing to trade 340 as it did in November.
Short Soybean Oil Recommendation
Entry: Sell 2 July soybean oil futures at the market, currently 69¢.
Alternative Put Options: 66¢ put options trading at roughly 1.75¢, expires 6/26 – 71 DTE. This gives up nearly 5¢ of profit if the market tanks, but limits risk to premium paid.
Target: Moderate set back target is 64¢. Next major support is 56¢
Risk Exit: Exit on a close over 70.0. Alternatively, 70.25 straight stop GTC.
Graphic:
Click here to read the re-introduction of the BIS Speculative Newsletter
Click here to return to BIS Speculative Newsletter Home Page
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.