We are going to keep this short and to the point today.
July meal: Buy the 350 call and sell the 4.00 call. Cost $350-380 per spread, max profit is 5K minus commissions and fees if futures settle above 4.00.
Trend line designated by blue arrow has held for weeks, yet meal hasn’t gone anywhere. A wedge has formed here dating back to September and October. If we hold the line, we should buy the spread and look for an eventual move to 353, half way back or 50% retracement from the 12 month high/low. Violate the line with a strong close under, and we are out. To take positions on both sides, buy the May Soymeal 290 put for 1.80 or $180. Meal Strangle cost approximately $530 plus commissions and fees.
Beans on the daily chart are in a wedge type formation as well, but not as severe as meal is in my view. Despite this malaise the range bound grains have been in lately, I expect some significant movement as we move into and through February. Again my opinion here. Lets look at some strangles as fundamentals (ending stocks) are bearish, but technical’s look bullish. These are simply taking positions or having exposure on both sides of the soybean market. I liken it to betting the Over for a Football game where the bettor is encouraged to root for both teams to score. What we are looking for is volatility or a significant percentage move up or down that allows us to “sell em higher”.
Bearish Strategy: Buy the May soybean 9.00 put. Sell 2 of the May soybean 1020 calls. Bid even money, no cost to entry except commissions and fees. Spread settled today at 3.5. So we need a little rally to buy the ratio at even.
Bullish Strategy: Buy the March 940 call for six cents. Or buy the May 19/Nov 19 bean spread at a 28/27 cent carry (May 19 under), and risk to 36 cents /may under. I would lean toward buying the call as I can always look to buy futures spreads later if the market breaks out to the upside.
Please join me tomorrow at 2:30 pm Central time for a free grain and livestock webinar. Signup is free and a recording link will be sent to your email. Call me 888 391 7894 or slusk@walshtrading.com