I put up an interesting trade this week in our weekly mock trading session.
It was a hedge trade......well kind of
the trade was buying 2 May 6.00 Corn puts and sell 1 8.00 Dec wheat call
below is some of the thinking i had on in the agweb.com marketing old and new crop discussion thread
http://discussions.agweb.com/showthread.php?14346-Marketing-Old-Crop-and-New-Crop-2012&p=225650#post225650
-------------
one strategy that we looked at in our marketing meetings this week was selling dec wheat calls to buy may and july corn puts
based on theory that dec-dec corn-wheat spread has corn well under valued versus wheat.....so selling a call in wheat instead of corn in hopes that if it turns into a HTA corn has gained some of the 1.20 or so discount that it presently is
i think the level we used was buying 2 6.00 may corn puts and selling 1 dec 8.00 wheat call for a small credit
the reason we used may instead of july or dec is protection cost of only 14-15 cents or so; plus if market breaks i don;t think new crop breaks nearlly as hard; i think breaks or rallies will be lead by old crop corn.........so if i want to protect a price break i want to protect the area that has the most risk......in this case old crop corn
it is much more risky and tricky to manage then using the same month and same commodity but it does have some reasoning behind it
any thoughts on the trade
selling 1 dec 8.00 to 8.50 cbot wheat call to buy 2 6.00 ish may corn puts......as protection against corn.....and a sale on top side for corn
It was a hedge trade......well kind of
the trade was buying 2 May 6.00 Corn puts and sell 1 8.00 Dec wheat call
below is some of the thinking i had on in the agweb.com marketing old and new crop discussion thread
http://discussions.agweb.com/showthread.php?14346-Marketing-Old-Crop-and-New-Crop-2012&p=225650#post225650
-------------
one strategy that we looked at in our marketing meetings this week was selling dec wheat calls to buy may and july corn puts
based on theory that dec-dec corn-wheat spread has corn well under valued versus wheat.....so selling a call in wheat instead of corn in hopes that if it turns into a HTA corn has gained some of the 1.20 or so discount that it presently is
i think the level we used was buying 2 6.00 may corn puts and selling 1 dec 8.00 wheat call for a small credit
the reason we used may instead of july or dec is protection cost of only 14-15 cents or so; plus if market breaks i don;t think new crop breaks nearlly as hard; i think breaks or rallies will be lead by old crop corn.........so if i want to protect a price break i want to protect the area that has the most risk......in this case old crop corn
it is much more risky and tricky to manage then using the same month and same commodity but it does have some reasoning behind it
any thoughts on the trade
selling 1 dec 8.00 to 8.50 cbot wheat call to buy 2 6.00 ish may corn puts......as protection against corn.....and a sale on top side for corn
No comments:
Post a Comment