The Straddle Run
Aug 08, 2013
By Dan Burke, Chief Options Strategist, Walsh Trading, Inc.
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 email@example.com.
PLEASE JOIN US FOR OUR WEEKLY WEBINAR ON GRAINS -- STRAIGHT FROM TIM HANNAGAN, GRAIN SPECIALIST, WALSH TRADING, INC.
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.