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. This week has been particularly busy, and we wanted to get these to you earlier in the week, but at least we can get them to you prior to the report.
We have a very unique situation on our hands. It has been 3 months since the last USDA report, a report that added nearly 2 billion bushels to US corn production. Since then, disease issues took root, the growing season concluded, and now harvest has nearly concluded. Many producers are sitting on a lot of bushels, and don’t know if this is a selling opportunity or the beginning of a significant move higher. Friday’s USDA report will have a lot to say about that.
The other thing that makes this situation unique is that December options expire next Friday, providing just enough time coverage to get through the report, a weekend where news can hit, and a full week of trading for the market to digest the first new USDA information in 3 months. Nice setup.
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.
We are also writing this as the market is closed, so check options prices before blindly entering orders. 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 December 440 put option, last traded 6.25¢
Alternative Options: 438p – 4.45¢, 435p – 3.25¢
Risk Exit: None, total risk is premium paid
Long Corn Recommendation
Entry: Buy 1 December 440 call option, last traded 6.75¢
Alternative Options: 443c – 5.75¢, 445c – 4.5¢, 450c – 2.5¢
Risk Exit: None, total risk is premium paid
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 the best strategy. Choose any two strike prices but this works as follows. If you bought the 435p and 445c 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.
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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.