The DeCarley perspective: Strategy recommendation, bull call spread in christmas corn.
On the radar:
The grain market has probably priced in the ethanol demand collapse and seasonals for December corn are turning bullish. We like bull call spreads.
DECEMBER CORN BULL CALL SPREAD USING THE 350/400 STRIKES.
Either the world is coming to an end or commodities are great long-term buys. As optimists, we are hoping for the latter. December corn futures represent the "new crop" which could face dramatically different fundamentals than the current crop, which most expect to be well supplied. Further, the ethanol demand destruction has probably been priced in (hopefully, this is a short term story). With this in mind and supportive seasonals for Christmas corn, we like the idea of a long-handed play with low and limited risk.
Specifically, buying the December corn $3.50 call and selling the December corn $4.00 call for about 11.5 cents, or $575. This represents the total risk of the trade which would occur if held to expiration and the price of corn was below $3.50 on November 20th (this trade gives you over 200 days in the market). If held to expiration and the price of corn is above $4.00, the trade nets a max profit of about $1,925. These profit and loss figures are prior to accounting for transaction costs.
If the market turns quickly, we would be more than willing to take a quick (lesser) profit.
Margin: $0
Delta: .20
Zaner360 symbols: OZCZ20 C3.5 and OZCZ20 C4
*There is unlimited risk in naked option selling and futures!
Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.
Seasonality is already factored into current prices, any references to such does not indicate future market action.
There is a substantial risk of loss in trading futures and options.
These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.
The grain market has probably priced in the ethanol demand collapse and seasonals for December corn are turning bullish. We like bull call spreads.
DECEMBER CORN BULL CALL SPREAD USING THE 350/400 STRIKES.
Either the world is coming to an end or commodities are great long-term buys. As optimists, we are hoping for the latter. December corn futures represent the "new crop" which could face dramatically different fundamentals than the current crop, which most expect to be well supplied. Further, the ethanol demand destruction has probably been priced in (hopefully, this is a short term story). With this in mind and supportive seasonals for Christmas corn, we like the idea of a long-handed play with low and limited risk.
Specifically, buying the December corn $3.50 call and selling the December corn $4.00 call for about 11.5 cents, or $575. This represents the total risk of the trade which would occur if held to expiration and the price of corn was below $3.50 on November 20th (this trade gives you over 200 days in the market). If held to expiration and the price of corn is above $4.00, the trade nets a max profit of about $1,925. These profit and loss figures are prior to accounting for transaction costs.
If the market turns quickly, we would be more than willing to take a quick (lesser) profit.
Margin: $0
Delta: .20
Zaner360 symbols: OZCZ20 C3.5 and OZCZ20 C4
*There is unlimited risk in naked option selling and futures!
Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.
Seasonality is already factored into current prices, any references to such does not indicate future market action.
There is a substantial risk of loss in trading futures and options.
These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Seasonal tendencies are a composite of some of the more consistent commodity futures seasonals that have occurred over the past 15 or more years. There are usually underlying, fundamental circumstances that occur annually that tend to cause the futures markets to react in similar directional manner during a certain calendar year. While seasonal trends may potentially impact supply and demand in certain commodities, seasonal aspects of supply and demand have been factored into futures & options market pricing. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future.
Author
Carley Garner
DeCarley Trading
Carley Garner is an experienced commodity broker with DeCarley Trading, a division of Zaner, in Las Vegas, Nevada. She is also the author of multiple books including, “Higher Probability Commodity Trading” and “A Trader's First Book on Commodities”.
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