Commentary
Soybeans found itself in the crossfire between a hot/dry WCB forecast the next 10 days and a profit taking realignment in the oil share trade in my opinion. Current weather outlooks for the critical August pod setting and filling period could be seen as somewhat worrisome, since temperature forecasts are warmer than normal, and precipitation is leaning towards the lower end of estimates. Those risks may support the market in the coming weeks. Growing dryness outside the Corn Belt may also prove more supportive for beans than corn. However, three straight weeks of net export sales reductions and a downward revision to sales for the week of June 23 are not helping the demand side of the balance sheet. That said the June 30th acreage report showed a 2 million acres less of bean plantings than the Trade was looking for. That report will be resurveyed in the August WASDE on Friday August 12th. The USDA will resurvey the Dakotas and Minnesota and report their findings on planted acres for corn, beans, and Spring wheat. In my view given the acreage uncertainty and unpredictability of weather, this recent dip in bean prices during first two weeks of July may provide a buying opportunity. A suggest a diagonal option spread below.
Trade Ideas
Futures-N/A
Options-Buy the October 22 soybean 15.00 call and sell the November Soybean 16.00 call for 5 cents. Symbol: ZSX22C1600:V22C1500[DG]
Risk/Reward
Futures-N/A
Options- The strategy has unlimited risk as one is long an October option and short a November option. As we enter into as a spread, one should exit this strategy as a spread. Risk should be approximately 10 cents as one could put a GTC stop in approximately ten cents or $500.00 from entry, plus all commissions and fees. My thinking here is if beans were to rally on a weather premium, the potential exists that November soybeans rally near the Spring highs of 1580 during August, which potentially could see the long October 22 option get deep into the money in my opinion. Call me with questions.
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