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August 2013 Archive for The Grain Report

RSS By: Sean Lusk, AgWeb.com

Market updates from Walsh Trading.

The Grain Report by Tim Hannagan for August 30, 2013

Aug 30, 2013

By Tim Hannagan, Grain Specialist at Walsh Trading, Inc. Tim has more than 37 years of experience in commodity markets and is a nationally recognized expert on the grain markets.

On Thursday our weekly export sales report came out showing wheat exports last week at 551,000 metric tons up 12% from the week prior but down 4% from the four week average.  We need 850,000 thousand metric tons to be bullish each week and take prices higher.  Mexico was in as their drought has them filling needs buying a lot of wheat and corn and Brazil was in for the ninth consecutive week after bad weather in Argentina's wheat growing regions has them unable to fulfill needs from Brazil.  Missing was number one world wheat buyer Egypt.  As I noted prior we don't expect them any time soon as our political differences have them buying elsewhere.   Egypt the this week purchased  five cargoes of wheat from Romania, Ukraine and  Russia at a price of $22.00 per ton less than U.S. posted prices.  Were about 30 days from the European Union  being sold out and the U.S. moving  into a primary port position to move wheat to the world.  New crop corn sales for delivery after September 1 the beginning of the new marketing year was 673,000 metric tons.  Mexico was in for 317,000 and regular U.S. wheat corn buyer  Japan in for 138,000 metric tons of the total. We need 850,000 sold weekly to hold prices steady in the futures market and 1.1  million metric tons or more to push prices higher.  Missing from the list was China, as they were more active buying beans and sitting back waiting for hopefully harvest low prices before purchasing corn from the U.S.

Soybean exports for delivery after September 1 were 868,000 metric tons with 404,000 to an unknown destination.  Unknown is spelled CHINA. Additionally China purchased 229,000 metric tons for a 635,000 metric ton total.  Bean yearly exports are at 50% of the USDA forecast vs. the five year average of 31%. It is clear the USDA is underestimating export sales that currently are running at a record pace.  The sales are lower than the the two prior weeks but there still very good and show a strong  demand base. Note, we just rallied 2.50 per bushel the last three weeks and demand barely blinked. Traders are being cautious heading into the weekend as talk of some rain may fall in the grain belt.  Between now and Tuesday  the upper plains will see  0.25 inches over 40% of the area and the western  and  eastern grain belt with  . 25 to.75 inches with 50% coverage, but many believe that it could get larger as we get closer to the weekend.  This past week laid out just as we projected on last Friday's report.  We said to expect a  measurable corn and bean rally Sunday night into Monday off the perception this would be a very hot and dry week cutting down on yield projections again.  I noted the high for the week would occur during  that period and of course that's exactly what happened on three fronts that we brought to your attention.  One, funds would take profits after pricing in the weather as its end of the month and funds can pay handsome bonuses on profits taken if taken before the month ends.  Two, large traders will not leave large profit positions sitting on the table with a three day holiday. Three, there was talk of rain late in the forecast that might prevent them from wanting to be long going into the weekend and of course we just talked about that.  We said funds would sell any daily rally and so far they have. So as this week we said sell the rallies, next week is setting up to buy the breaks. Next week looks to finish higher for the week on several issues.  We look to be generally cooler but drier across the Midwest grain belt will no significant rains. There will also be talk of a frost on the Canadian border and possibly in Northern Wisconsin and Minnesota on September 5 and 6th. This is a reminder to the trade that the crops planted late are still in jeopardy of being hurt by a frost as we head into September. We will also save private forecasters releasing their pre report estimates of the September 12 USDA monthly crop report.  With August setting up to be one of the driest on record we have to expect those reports to come out with projections of lower corn and bean productions, lower yields and lower ending stocks being projected. These three issues all looks to have trend following and index funds buying breaks in the market and giving us a higher close for the week.   Technicals read like this.   December wheat support  is 6.48 then 640.  Resistance is 6.80 then 6.86.  A close over 6.86 and trend following funds holding a net short position of 77,000 contracts will begin buying back those contracts  giving us a sharp rally to 7.10 then 7.25.  November soybean support is 13.50 then 13.35.  Resistance is a 13.85, 14.10 then 14.50. Don't hold long beans on a close under 13.30.  December corn support is 4.78 then 4.64 with resistance 5.00.  

You can contact Tim at 312-957-8108 or 888.391.7894 or email him at thannagan@walshtrading.com. Please visit our website at www.walshtrading.com for daily audio and market insights as well as special reports and live webinars.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Dan Burke's Daily Option Run, August 29th 2013

Aug 29, 2013

DAN BURKE'S DAILY OPTION RUN 08/29/13

GRAINS

MACRO OUTLOOK:  In my opinion, the medium to long term outlook for Grains is bearish.  In review of the daily charts, I would suggest this recent move upward, caused by a sudden appearance of heat and dryness, will run out of momentum and turn to the downside again.  This suggestion is also based on our weather model forecasts and per federal policy.  Let us be reminded the minutes of the FOMC meeting state that economic fundamentals of the U.S. economy are solid again.  Therefore, there is a potential longer term drag on Grains coming from the expectation of a stronger U.S. dollar.   In order to take full advantage of price discovery, we must keep an astute eye on potential yield and incoming weather.  Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your Grains using real examples.  Keep in mind, commissions and fees are not included in the cost of the option.

SOYBEAN HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

NOV '13

JAN '14

MAR '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1250P

6.3

318.75

1200P

8.3

418.75

1140P

7.2

362.50

1100P

4.5

231.25

1220P

4.0

200

1180P

6.5

331.25

 

 

 

 

 

 

1200P

2.7

143.75

1100P

2.4

125

 

 

 

 

 

 

END USERS

OCT '13

NOV '13

JAN '14

MAR '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1500C

7.6

387.50

1600C

7.5

381.25

1700C

6.3

318.75

1680C

7.2

362.50

1550C

4.2

212.50

1620C

6.3

318.75

 

 

 

 

 

 

1600C

2.3

118.75

1650C

5.0

250

 

 

 

 

 

 

 

CORN HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

460P

6.7

343.75

435P

8.3

418.75

410P

7.0

350

400P

7.4

375

440P

2.7

143.75

420P

5.3

268.75

 

 

 

 

 

 

420P

1.1

56.25

400P

3.0

150

 

 

 

 

 

 

END USERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

500C

7.7

393.75

535C

8.5

431.25

630C

5.2

260

700C

5.3

268.75

510C

5.4

275

550C

6.2

312.50

 

 

 

 

 

 

520C

3.7

193.75

560C

5.2

262.50

 

 

 

 

 

 

 

WHEAT HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

645P

10.1

506.25

605P

8.2

412.50

550P

4.3

218.75

550P

10.7

543.75

635P

6.3

318.75

590P

5.2

262.50

 

 

 

 

 

 

625P

3.5

181.25

580P

3.7

193.75

 

 

 

 

 

 

END USERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

680C

5.6

287.50

720C

9.0

450

810C

8.2

412.50

850C

10.7

543.75

690C

3.7

193.75

730C

7.5

381.25

 

 

 

 

 

 

700C

2.5

131.25

750C

5.3

268.75

 

 

 

 

 

 

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low.

 

For more market information, Dan can be reached at 312.957.8248 or via e-mail at dburke@walshtrading.com.

Stay Green!  Go Paperless and fill out this online application in order to trade Futures and Options-https://accountforms.rcgdirect.com/

Dan Burke's Daily Option Run, August 28th 2013

Aug 28, 2013

 

DAN BURKE'S DAILY OPTION RUN 08/28/13

GRAINS

MACRO OUTLOOK:  In my opinion, the medium to long term outlook for Grains is bearish.  In review of the daily charts, I would suggest this recent move upward, caused by a sudden appearance of heat and dryness, will run out of momentum and turn to the downside again.  This suggestion is also based on our weather model forecasts and per federal policy.  Let us be reminded the minutes of the FOMC meeting state that economic fundamentals of the U.S. economy are solid again.  Therefore, there is a potential longer term drag on Grains coming from the expectation of a stronger U.S. dollar.   In order to take full advantage of price discovery, we must keep an astute eye on potential yield and incoming weather.  Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your Grains using real examples.  Keep in mind, commissions and fees are not included in the cost of the option.

SOYBEAN HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1250

5.4

270

1200

6.6

330

1140

5.6

280

1100

6.5

325

1000

5.6

280

1220

3.4

170

1180

5.2

260

 

 

 

 

 

 

 

 

 

1200

2.4

120

1100

2.0

100

 

 

 

 

 

 

 

 

 


END USERS

OCT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1500

8.2

410

1600

7.0

350

1700

6.0

300

1680

7.6

380

1800

5.2

260

1550

5.0

250

1620

5.7

285

 

 

 

 

 

 

 

 

 

1600

3.0

150

1650

4.5

225

 

 

 

 

 

 

 

 

 

 

CORN HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

460

8.0

400

435

9.0

450

410

7.2

360

400

7.7

385

440

3.5

175

420

6.0

300

 

 

 

 

 

 

420

1.5

75

400

3.2

160

 

 

 

 

 

 

END USERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

500

9.0

450

535

9.1

455

630

5.2

260

700

5.6

280

510

6.4

310

550

6.6

330

 

 

 

 

 

 

520

4.5

225

560

5.4

270

 

 

 

 

 

 

 

WHEAT HEDGE OPPORTUNITIES

PRODUCERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

645

9.0

450

605

8.0

400

550

4.1

205

550

10.5

525

635

5.6

280

590

5.1

255

 

 

 

 

 

 

625

3.4

170

580

3.6

180

 

 

 

 

 

 

END USERS

OCT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

680

7.7

385

720

11.0

550

810

9.3

465

850

12.3

615

690

5.4

270

730

9.3

465

 

 

 

 

 

 

700

3.6

180

750

6.6

330

 

 

 

 

 

 

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low.

For more market information, Dan can be reached at 1.312.957.8248 or via e-mail at dburke@walshtrading.com.

Stay Green!  Go Paperless and fill out this online application in order to trade Futures and Options--https://accountforms.rcgdirect.com/

Daily Option Run by Dan Burke 8272013

Aug 28, 2013

 DAN BURKE'S DAILY OPTION RUN

GRAINS

MACRO OUTLOOK:  In my opinion, the medium to long term outlook for Grains is bearish.  In review of the daily charts, I would suggest this recent move upward, caused by a sudden appearance of heat and dryness, will run out of momentum and turn to the downside again.  This suggestion is also based on our weather model forecasts and per federal policy.  Let us be reminded the minutes of the FOMC meeting state that economic fundamentals of the U.S. economy are solid again.  Therefore, there is a potential longer term drag on Grains coming from the expectation of a stronger U.S. dollar.   In order to take full advantage of price discovery, we must keep an astute eye on potential yield and incoming weather.  Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your Grains using real examples.  Keep in mind, commissions and fees are not included in the cost of the option.

SOYBEAN HEDGE OPPORTUNITIES

 

PRODUCERS

SEPT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1270

4.4

220

1200

5.0

250

1100

6.40

320

1080

5.4

270

940

3.6

180

1220

2.0

100

1190

4.4

220

 

 

 

 

 

 

 

 

 

1180

1.1

110

1100

1.4

700

 

 

 

 

 

 

 

 

 


END USERS

SEPT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1460

17.6

880

1490

24.4

1200

1580

19.2

960

1600

16.0

800

1660

13.7

685

1500

11.0

550

1500

21.7

1085

 

 

 

 

 

 

 

 

 

1540

7.2

360

1510

19.6

980

 

 

 

 

 

 

 

 

 

 

CORN HEDGE OPPORTUNITIES

PRODUCERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

460

5.7

175

440

8.0

400

400

5.1

255

400

6.3

315

440

2.6

130

420

4.6

230

 

 

 

 

 

 

430

2.0

100

400

3.0

150

 

 

 

 

 

 

END USERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

510

11.7

305

530

15.0

750

600

11.2

560

630

16.0

800

530

5.6

220

550

10.6

530

 

 

 

 

 

 

540

4.0

200

570

7.0

350

 

 

 

 

 

 

 

WHEAT HEDGE OPPORTUNITIES

PRODUCERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

650

10.0

500

620

12.6

630

560

6.1

305

530

7.5

375

640

6.1

305

600

8.1

405

 

 

 

 

 

 

635

5.5

275

580

4.3

215

 

 

 

 

 

 

END USERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

690

 

7.4

370

700

19.0

950

790

15.4

770

810

20.6

1030

710

3.7

185

720

14.2

710

 

 

 

 

 

 

720

4.3

215

740

11.0

550

 

 

 

 

 

 

 

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low.

The Grain Report by Tim Hannagan

Aug 23, 2013

Tim Hannagan is a Grain Analyst for Walsh Trading, Inc. and a nationally recognized expert on the grain markets.

Thursday at 7:30 AM central time we got a look at the demand side of the market. The weekly export sales report indicated 494,000 metric tonnes of wheat was sold last week. That’s down 20% from the four week average.  Brazil was purchased 188 and China 52 of the total. Both are regular buyers on a weekly basis. Thailand, South Korea and Taiwan were in for smaller amounts of feed quality wheat at a discount to cash for high protein wheat certified for human consumption.

Sales have been slow for the last three weeks as harvests wind down in the European Union. Sales of wheat at discounts to U.S. prices should come to a screeching halt as we approach October 1st.  The U.S. will then become a primary port of origin for wheat. At that point we expect trend following funds to start buying back their short position of 75,000 contracts.  New crop corn sales for delivery after September 1st stood at 434,000 metric tons this week vs. the four week average of 665,000.  Importers are putting off purchases awaiting lower cash prices at harvest. Currently cash prices are $1.50 over September futures and the Ukraine is selling corn and a 72¢ discount to U.S. prices and a 32¢ discount to Brazil’s. We expect new crop corn sales to pickup measurably as harvest begins.  New crop soybean sales stood at 926,000 metric tonnes. Key player China purchased 681 of the total and 159 to an unknown destination A.K.A. China.  This is 1.8 million metric tonnes lower than China’s purchase of 1.3 million metric tonnes last week. Still a respectable demand number.  As of August 8th export sales stood at 48% of the USDA’s forecast for the 2013-14 marketing year compared to the five year average of 30%.  No one wants to be caught short of grain for the third consecutive year as the new marketing year approaches.  Feeders, end users and exporters looking at empty storage bins will buy cash grain at record levels this year to garner grain out of the farmer’s hands. Avoiding the $1.50 to $1.80 cash premiums over nearest futures they had been paying for the last four months. Grain prices are trading higher Friday as expected.  Traders do not want to be short going into this weekend. Everyone is looking to get long ahead of Sunday as weather forecasts call for virtually no rain through August 31st and a 10 day stretch of the hottest weather this growing season. WXRISK.com a very well followed weather site sees 85% of the Midwest grain belt as being dry with temperatures in the high nineties and 101° in the western grain belt states.  Look for a sharp, sizable rally Sunday night into Monday’s trade.  But, don’t expect the market to rally all week off the hot dry conditions.  There are three reasons the early week highs will hold for the week.   One - It’s the end of the month when funds can pay a 2 to 3 percent bonus on profits taken before month end. This makes for an easy decision if you’re a fund manager. Two: large traders will not leave their chips lying on the table ahead of the three day Labor Day weekend.  Three: Long term forecasts show that upon return from the holiday Tuesday, temperatures will be wet and much cooler September 3rd through 5th.   Traders going long into the weekend should look to take profits on the initial rally as index and trend following funds price in the weather premium.

If the weather forecast holds true we should expect new crop November beans to test $13.50 and December new crop corn to test $5.00.  Just a note, every Thursday at 3:00 PM central time I hold a free grain webinar to  discuss the fundamentals of supply and demand, weather and point out the technical aspects of the grains using the charts to identify trading patterns. The webinars run an hour to an hour and half.  They are available recorded as well. If you are interested in attending just send us your E-mail address and we will send you a link to get in free. Indicate whether you wish to attend the live or recorded presentation.

If you have any questions or comments, please contact Tim at 312-957-8108 or 888-391-7894 or email him at thannagan@walshtrading.com. Please visit our website at www.walshtrading.com for daily audio commentaries, market insights, webinar recordings and more. If you missed Tim's Weekly Grain Webinar yesterday, August 22nd, you can access it here.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Daily Option Run by Dan Burke

Aug 23, 2013

 DAN BURKE'S DAILY OPTION RUN 08/22/2013

GRAINS

MACRO OUTLOOK:  In my opinion, the medium to long term outlook for Grains is bearish.  In review of the daily charts, I would suggest this recent move upward, caused by a sudden appearance of heat and dryness, will run out of momentum and turn to the downside again.  This suggestion is also based on our weather model forecasts and per federal policy.  Let us be reminded the minutes of the FOMC meeting state that economic fundamentals of the U.S. economy are solid again.  Therefore, there is a potential longer term drag on Grains coming from the expectation of a stronger U.S. dollar.   In order to take full advantage of price discovery, we must keep an astute eye on potential yield and incoming weather.  Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your Grains using real examples.  Keep in mind, commissions and fees are not included in the cost of the option.

SOYBEAN HEDGE OPPORTUNITIES

PRODUCERS

 

 

SEPT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1300

2.00

100

1200

15.3

765

1180

6.20

310

1040

7.00

350

960

6.70

343.75

 

 

 

1190

13.6

680

 

 

 

 

 

 

 

 

 

 

 

 

1100

4.20

210

 

 

 

 

 

 

 

 

 

END USERS

 

 

SEPT '13

NOV '13

JAN '14

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

1340

2.00

 

1490

8.00

 

1580

4.60

230

1600

7.00

350

1660

7.10

356.25

 

 

 

1500

6.50

 

 

 

 

 

 

 

 

 

 

 

 

 

1510

5.50

 

 

 

 

 

 

 

 

 

 

 

CORN HEDGE OPPORTUNITIES

PRODUCERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

485

3.40

175

440

13.4

670

400

5.70

285

400

7.60

380

 

 

 

420

7.50

375

 

 

 

 

 

 

 

 

 

400

4.10

205

 

 

 

 

 

 

END USERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

495

1.40

75

490

14.50

725

600

5.00

250

630

8.00

400

 

 

 

510

9.50

475

 

 

 

 

 

 

 

 

 

530

4.20

210

 

 

 

 

 

 

 

WHEAT HEDGE OPPORTUNITIES

PRODUCERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

630

1.6

80

620

17.3

865

560

6.40

320

530

8.40

420

 

 

 

600

10.5

525

 

 

 

 

 

 

 

 

 

580

5.5

275

 

 

 

 

 

 

END USERS

SEPT '13

DEC '13

MAR '14

JUL '14

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

STRIKE

PRICE

COST

635

1.0

50

700

11.20

560

790

8.60

430

810

15.0

750

 

 

 

720

8.10

405

 

 

 

 

 

 

 

 

 

740

6.20

310

 

 

 

 

 

 

 

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low.

For more market information, Dan can be reached at 1.312.957.8248 or via e-mail at dburke@walshtrading.com.

Stay Green!  Go Paperless and fill out this online application in order to trade Futures and Options--https://accountforms.rcgdirect.com/

 

Tune in today for Tim Hannagan's weekly look at the grain markets

Aug 15, 2013

Tim Hannagan, Grain Analyst for Walsh Trading, Inc. - Weekly Grain Webinar TODAY at 2:00 PM CST.

You can join Tim for his weekly look at the grain markets TODAY. Tim has more than  37 years of experience in commodity markets and is a nationally recognized expert on the grain markets. His opinions frequently appear in The Wall Street Journal, Barrons, Futures Magazine, Investors Business Daily, and other periodicals as well as international news wire services, online blogs, commodity news services and nationally televised networks.

If you are unable to attend today's webinar, it will be available on our website at www.walshtrading.com later this evening. Feel free to contact Tim at 1.888.391.7894 or via email at thannagan@walshtrading.com.

Grain Straddle Run by Dan Burke for August 14, 2013

Aug 14, 2013

Grain Straddle Run August 14, 2013

By Dan Burke, Chief Options Strategist for Walsh Trading, Inc.

United States Producer Price Index M/M was released at up 0.0%.  Expectations were for up 0.3%.  The United States Producer Price index Y/Y was up 2.1%.

GRAINS

The December Corn is currently 449-6 last.  The Dec Corn 450 straddle (100 days to expiration) is showing a last value of 46-4.  The implied volatility is off as the market trades upward in a quiet fashion on the day.  It is my opinion that Corn will move lower.

The November Soybeans are trading 1226-2 last.  The Nov Bean 1230 straddle (72 days to expiration) is showing a last trade of 79-6.  The implied volatility is off as prices trade sideways to downward.  I believe the Beans will return to the downside.

The September Wheat is resting at 628-4 last.  The Sept Wheat 630 straddle (9 days to expiration) is showing a last value of 17.  The implied volatility is offered as prices are trading sideways to upward on the morning.  It is my belief that Wheat will see further downside.


Please REGISTER for Tim Hannagan's Weekly Grain Webinar on Aug 15, 2013 2:00 PM CDT. Tim is a Grain Analyst for Walsh Trading and a highly sought after commentator on the grain markets. 



It is my opinion that someone looking for hedge protection may look at the following trades in soybeans for protection. I propose buying the November 2013 Soybean 1100 puts for 6.5 cents, for a cost of $325.00 plus commission and fees.  For near term, I also propose buying September Soybean 1190 puts for  2.0 cents or better , which would cost $100.00 plus commissions and fees.

As for Corn, I’m looking at the December 2013 Corn options. It is my belief that a hedging opportunity exists in buying the Dec 2013 Corn 4.00 puts for 5 cents, or $250 in cash value plus commissions and fees.

For CBOT September 2013 Wheat, I believe the best hedge on your production can be in purchasing downside protection at the 620 strike for 6 cents, or $300 in cash value. Also for further out protection, a purchase of the October 2013 Wheat 600 puts for 3-6 cents per option, or $187.50 in cash value plus commission and fees offers great value..

These option strategies of buying outright puts defines what our risk on the positions entails The risk is the purchase price paid for each option plus commission and fees.  I  take pride in my management in managing your risk by using options.  This takes more attention, but helps keep our clients away from margin concerns.  Our trading analysis of upcoming weather forecasts along with our understading of trend following fund psychology  is a major emphasis for our aforementioned trade recommendations. Walsh Commercial Hedging constantly provides our clients with up to date weather models, support and resistance technical levels, and knowledge of grain market influences.  We believe a well informed trader will be put in the most advantageous positions.

For more market information, Dan can be reached at 1.312.957.8248 or via e-mail at dburke@walshtrading.com.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low. 

The Grain Report August 9, 2013

Aug 12, 2013

By Tim Hannagan, Grain Specialist, Walsh Trading, Inc. You can contact Tim at 312-957-8108 or 888.391.7894 or email him at thannagan@walshtrading.com. For further market insights, visit www.walshtrading.com.

 

Weekly export sales were released Thursday at 7:30 AM CDT. 726,000 metric tons of wheat was sold for the new marketing year which began June 1st. This was up 22% from the previous week, but 22% lower than the four week average. Asian markets account for 70% of our feed grain exports annually. Not one Asian country placed orders in excess of 100,000 metric tons. They are clearly buying feed quality wheat at cash price discounts. Missing was number one world wheat buyer Egypt who has been absent from the U.S. buying list for nine consecutive weeks. In part wheat from the black sea region is being sold at a discount to U.S. prices as the Ukraine and Russia attempt to re- assert their positions as major world wheat exporters. Egypt will turn to us as exportable wheat supplies dwindle in Europe. Old crop corn sales scheduled to be shipped before the new marketing year begins September 1st stood at 290,000 metric tons. 850,000 metric tonnes are needed on a weekly basis to be price friendly. New crop sales for post September 1st delivery ran 220,000 metric tons. Key world player China was absent from the buying list. Clearly, China and their Asian neighbors are awaiting new crop supply at lower prices. Old crop soybean shipments were 79,000 metric tonnes and hardly worth mentioning. New crop soybean sales were 1.0170 metric tonnes. China accounts for 95% of our bean exports and purchased 950,000 metric tonnes of the total. Chinese trade data released overnight indicated 7.2 million tonnes were purchased in July. This is a record for the second consecutive month. This aggressive buying by China comes as they sell expensive old crop reserves to domestic users. It's normal for China to sell old crop reserves at a high price and buy on the world market at a lower price. After pricing in the week's bearish weather scenario Sunday into Tuesday we've seen short covering in the corn and bean market. The shorts have the profits. Their risk is the market information released Monday in the monthly USDA crop report. If the weather reports for next week confirm a continuation of cool temperatures and normal rainfall, it will likely set the tone for a lower start Sunday night into early Monday morning. The USDA crop report will be released at 11:00 AM CDT and will likely dominate the trade into the close.

 

Pre-report trade estimates suggest that corn production will come in at 14.036 billion bushels vs. 13.950 the month prior. Soybeans are estimated to be 3.357 vs. 3.420. Regarding soybeans the trade believes that late planting cool evenings and in some cases excessive rain hurt the crop. On the other hand the latest USDA crop condition report suggests soybean quality is well over the 10 year average. Higher corn numbers come as traders see 81% of the crop in its pollination stage with no real heat damage and timely rain. The changes suggested are marginal at best. What traders will be looking at is the ending stocks or carryover number. Carryover for corn is estimated at 2.013 billion bushels vs. 1,959 last month. Here's where we could see a surprise. Last month's number was lower than the month prior and the government seldom switches direction unless there's a dramatic change in usage and that's not evident. Soybean ending stocks are estimated to be 262 million bushels, well under last month's 295. Keep in mind total usage for the 13/14 marketing year according to the last USDA crop report is 3.264 billion bushels and subtracted from this year's estimated production of 3.357 leaves ending stocks at 93 million bushels. I do not believe this is going to happen. Something will have to change in the USDA database. Perhaps lower feed usage, bio-fuel consumption or exports. There is certainly room for a big surprise in beans. The government generally leans to the conservative side in its August report and starts making changes in September. I expect more neutrality Monday's report. Once the report is over the trade will go right back to trading the weather and its impact on current yields. Support on December corn entering the new week is 4.48 with resistance at 4.78 then $5.00. New crop November beans havesupport at 11.50 and 11.10. Resistance rests above at 12.10 then 12.50.

 

Support in September wheat is 6.25 and resistance at 6.85. If there are surprises in Monday's USDA crop report traders forgo trading the charts and trade on emotion. This will likely create extreme volatility.
 

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

The Straddle Run

Aug 08, 2013

By Dan Burke, Chief Options Strategist, Walsh Trading, Inc.

GRAINS

The December Corn is currently 461-2 last.  The Dec Corn 460 straddle (107 days to expiration) is showing a last value of 49-2.  The implied volatility is offered down this morning as the market trades steady.  It is my opinion that the bear holds the street and this will give way to more downside. 

The November Soybeans are trading 1170 last.  The Nov Bean 1180 straddle (79 days to expiration) is showing a last trade of 86-7.  The implied volatility is steady as price action continues to give more to the downside.  I believe the bear has the street until the next report is published.

The September Wheat is resting 648 last.  The Sept Wheat 650 straddle (17 days to expiration) is showing a last value of 23-8.  The implied volatility is bid even with the price action moving to the downside again.  It is my belief that we will see further downside.

In the last few weeks, I have seen some dramatic downside moves in these Grains.  In order to meet speculative or hedging needs, it is my belief that the downside is what needs to be protected.  Therefore, I am calling for larger producers to take action by using puts.  I would recommend the November Soybean 1020 puts for 5.4 cents, or $270 in cash value.  I would also suggest buying the December Corn 400 put for 4.4 cents, or $200 in cash value.  Lastly, it is my belief that the large producer will best serve their needs in buying the Sept Wheat 620 puts for 5.1, or $255 in cash value.  Please take in mind that funds will need to take some profit before the next report. 

For more market information, Dan can be reached at 1.312.957.8248 or via e-mail at dburke@walshtrading.com.

PLEASE JOIN US FOR OUR WEEKLY WEBINAR ON GRAINS -- STRAIGHT FROM TIM HANNAGAN, GRAIN SPECIALIST, WALSH TRADING, INC.

http://tinyurl.com/grainwebinar0808

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low. 

The Grain Report August 2 2013

Aug 02, 2013

By Tim Hannagan, Grain Specialist for Walsh Trading, Inc.

Our first report of the week was the weekly export inspection report. It tells us how much of each grain was inspected by the USDA for near-term shipment. This grain generally is shipped within 30 days. Corn inspected for near-term export came in at 11 million bushels. Up from 9.9 the week prior and 9.7 on the four week average. We need 28 million bushels weekly to be bullish and push futures up. Big world corn buyer China was in for 0.189 of the total, not even 1 million bushels. They await new crop delivery dates after the harvest for better value. Corn demand remains bearish near-term and we look for this bearish pattern to exist thru August. Bean inspections were 1.3 million bushels. vs. 3.9 on the week prior and four week of 3.1. China the world’s biggest bean importer was in for .052 of the total. Like corn, China too awaits new crop delivery and beans at better value. Wheat inspections were 25.3 million bushels. up from 24.1 the week prior and four week average of 21.7. The wheat marketing year began June 1 and currently showed the shipment pace at 17.3% of the USDA estimates for the year vs. the five year average of 15%. The increased demand suggest the USDA may be low on its export forecast and traders will look for an increase in exports projections on the August 25 USDA monthly crop report. Our next demand based report was Thursday at 7:30 AM central time with our weekly export sales report showing exports for old crop shipment and new crop shipment year. Wheat exports were 596 thousand metric tonnes, down 10% from the previous week and 36% under the four week average. Egypt the world’s largest weekly and monthly importer of wheat in the world was absent from the buying list. Earlier this week Egypt’s grain authority announced its fourth purchase of the month in July at 240 total metric tonnes. Romania and the Ukraine brought the monthly total to 960 total metric tonnes. The problem was not a teaspoon of U.S. wheat was purchased. Even with this bearish weekly report that pushed wheat down 11¢ on the day in early trading, we remain over last year’s pace on demand. Old crop corn exports were 134 total metric tonnes. And below the four week average of 187. Five countries canceled previous shipments offsetting any new crop shipments that arose. Importing countries are awaiting new crop delivery early this fall with the possibility of a record corn crop and possibly a doubling or tripling of our ending stocks. New crop corn exports for shipment after September 1 came in at 1.091 million metric tons. Mexico’s drought had them in for 393 metric tonnes of the total with China purchasing 208 and an n unknown destination 302. Unknown is considered to be China. The problem with the better new crop sales they become lost in the translation. The shipment dates are spread out over 12 months and come with expectations of a record crop and larger ending stocks inventories. Funds trade what is current and the old crop sales are bearish. Soybean old crop sales were 78 metric tonnes down 39% from the previous week while new crop sales were 1.030 million metric tons with China in for 558 metric tonnes of the total. We had an unknown destination with302 and that means China as well. In conclusion the weekly export inspection and export sales report suggests a bearish pricing situation for corn and beans and more neutral to slightly friendly for wheat. Monday’s 3:00 PM crop condition report came in as a small surprise to the trade. Corn’s crop rating was 63% in good to excellent condition unchanged from the week prior as traders had expected a 2 or 3% increase due to cooler wetter conditions the week prior. Corn’s initial reaction was 5¢ higher on the overnight followed by a 10 to 12¢ declining as we headed into mid-session Tuesday. Reasons, this year’s good to excellent crop rating is 39 percentage points higher than last year’s drought stricken crop and two percentage points above the 10 year average as well as the 13th highest in the past 27 years for this date. The eastern grain belt average came in at 73% good-excellent and western grain belt 55%. But the trade sees the 2% better average than the 10 year as reason to believe were still on track for trend line yields. Unless the crop condition number declines under the 10 year average, we have to expect the USDA to continue to beef up its estimates for this year’s yield and production on its crop progress reports. Soybean conditions came in at 63% in good to excellent condition down 1% from the week prior and 4% over the 10 year average. Good-excellent crop rating was 34% above last year’s drought stricken crop, 4 percentage points above the 10 year average and the 10th highest in the last 27 years for this date After opening 5¢ higher on the overnight Monday they were trading 12 to 15 lower by mid-session Tuesday. Like corn, we can’t expect the governmental to lower yields or production on its monthly reports unless condition numbers begin to come in under the 10 year average. WXRISK.com the grain weather site sees the 6 to 10 day forecast as normal to above normal rainfall and cooler conditions across the Midwest grain belt. If this weather forecast holds true over the weekend it might suggest that we’re going to have lower prices Sunday night into Monday. Thursdays lower grain closes meant the sixth consecutive month in which we started the month lower but note that five of the last six months we ended up trending higher into the monthly USDA crop report. Than next report is Monday August 12. This could mean that a lower trade to price in the weather Sunday and Monday could hold as bottom support going into the crop report, followed by short covering as the shorts will have the profit therefore the risk to protect on report day uncertainty.

You can contact Tim Hannagan at 312-957-8108 or 888-391-7894 or email him at thannagan@walshtrading.com. Please visit our website at www.walshtrading.com for additional market insights and special reports.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Grain Straddle Run 7/31/2013

Aug 01, 2013

Grain Straddle Run 07/31/13

By Dan Burke, Chief Options Strategist, Walsh Trading, Inc.

Grains

The December Corn is currently 474-4 last.  The Dec Corn 470 straddle (114 days to expiration) is showing a last value of 52-7.  The implied volatility is down as corn trades sideways.  I think these are wonderful weather markets.

The November Soybeans are trading 1220-2 last.  The Nov Bean 1220 straddle (86 days to expiration) is showing a last trade of 95-4.  The implied volatility is steady as price action moves sideways to upward with some calm.  I think there are some wonderful opportunities to the upside.

The September Wheat is resting 654-4 last.  The Sept Wheat 655 straddle (23 days to expiration) is showing a last value of 32-4.  The implied volatility is slightly lower on steady price action to the side.  I like put side.

As we take in the price action of the grains, it is my view that the best opportunity can be taken in the November Soybeans (trading last at 1206).  Recently, this market seems to be offering the best opportunity for my clients utilizing conservative strategies for my clients.  It would be foolish for me to try and predict the weather and its influence on production, so in my view, it is important to take advantage of possible market movement in either direction.

Therefore, two strategies that I would recommend are classic option strategies for both the speculator and the hedger.  What I am proposing is the purchase of a combination of two option butterfly combinations.  This entails purchasing the November Soybean 1300 call, the November Soybean 1400 call and selling 2 November Soybean 1350 calls.  The purchase price of the call butterfly is 4 cents, or in cash value $200.  The risk on the trade is the cost of the spread plus all commissions and fees.  In order to be potentially protected to the downside, I also propose buying the November Soybean 1100 Put, the 1000 Put and selling 2 of the 1050 puts. The purchase price of the put butterfly spread is 3.7 cents, or a cash value of $185.  The risk on the trade is the cost on the spread plus all commissions and fees.

At the end of the day, it is my belief that the volatility, along with the unpredictability of the weather, compels us to protect ourselves on both sides of the market.  Spending a combined $385 plus commissions and fees is about as cheap as we get in commodities.  Please feel free to contact the Commercial Hedging Division at Walsh Trading at 888-391-7894. You may also visit us at www.walshtrading.com.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low. 

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