Commentary
Wheat in all classes resumed their gradual climb higher today again led by (HRS) or Minneapolis, with KC and Chicago in tow. Minneapolis wheat contracts made fresh contract highs with achieving the $10 mark on the nearby Dec contract a strong probability at this point before likely continuing higher. In my view U.S. losses in the Spring wheat area amid noise that the recent drop in Canadian production to 21 mmt still doesn’t grasp the true disaster of a potentially very short. Even Dec Paris futures also hit new contract highs and settled near them today. We have a feeling given the inflationary tone in the market, that global wheat buyers who are short bought may turn inelastic regarding price. , They could potentially continue to chase the market higher to get their needs covered in the near term. Given rallies across the commodity Board to support and buoyed by a bullish WASDE report last week in my opinion, I think the path of least resistance in wheat is higher. With this in mind, I posit the following trade.
Trade Ideas
Futures-N/A
Options-Buy the Chicago wheat 8.00 call for 7.4 cents or better plus commissions and fees.
Risk/Reward
Futures-N/A
Options-The risk is the price paid here at $375.00 plus commissions and fees. I’m looking technically to possibly see if Chicago wheat can take out the 754/756 area. If we get a settle over, its my opinion that we can possibly trade near 8.00 Dec Chicago futures. I have plenty more ideas to trade all three wheat classes using inter market spreads and options.
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Sean Lusk
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