We escaped the Spring and Early Summer without the much ballyhooed planting delays. Its June 9th, and some of the remaining grain perma bulls were touting an early freeze coming in late August?
The weatherman can’t even get past the next 72 hours with accuracy much less 72 days, in my opinion.
When its all boiled down, we still have plenty of time for some weather issue. Remember 2012? we were on pace for a big crack lower in corn, until Mother Nature turned off the water fountain after July 1st.
So is there still a possibility for a weather issue to save the bull’s bacon and pull it out of the fire? Yes.
December new crop corn is within 10 cents of its 4 year low posted down at $4.35. Funds are still long. Open interest increased last week, which indicates we have not had a huge move from long specs to short specs yet.
The beans won’t be made until August. For now, if you think that we can have a Dollar rally or more in corn, then its time to load up the truck.
CZ settled at 4.50. A CZ 4.60 5.60 call spread can be bought for 20 cents a bushel. That’s a 5:1 risk reward ratio, and you know your maximum down side risk from day one of putting on the trade.
September Corn options give you 73 days of upside play. Sep corn is at $4.47. A $4.70 call for 14 cents (700 bucks) or a $5.00 call for 8 cents (400 bucks) is a great risk/reward trade if you are convinced we are going to have a drought rally.
6 weeks from now, I’ll cite this entry. Since I don’t know what Mother nature has in store, I’d have a few on for a cheap spec.
the calls are cheap now because we’ve just had 80 cents evaporation in the price of corn in the past 22 trading days.
A rally which took 4 months to pick up 82 cents in CZ; only took 20 days to wipe out 85% of that rally. A contrarion would be quietly buying these calls when they are cheap.
CER