Commentary
December corn extended the sideways trade it’s been mired in that has persisted for about six weeks. This could continue into early next month ahead of USDA’s Nov. 9 Crop Production Report. Harvest pressure is dissipating even though progress, which had been running ahead of the five-year average. Still, the unsettled status of the Ukraine export deal continues to be a major outside risk, which expires Nov. 19. Russian officials continue to express resistance to any extension of the deal, but experts still expect Russia to agree to extend. Earlier today, Russia said only 3% of food exported under the U.N.-brokered deal has gone to the poorest countries. Regardless, there’s potential for greater volatility and sharp price moves in either direction in coming weeks. I would be looking at strangles as a way to play future volatility. The chart wedge tells me that we are in a wedge formation for the last 6 weeks or so. One way to play into the November 9th could be to use weekly options. The longer a market wedges, the better chance for an expanded move once the wedge is broken in my opinion.
Trade Ideas
Futures-N/A
Options-Buy the Week 2 December Corn 7.00 call/6.60 put strangle for 6 cents. Week 2 options expire two days post report on November 11th.
Risk/Reward
Futures-N/A
Options-the cost and risk on the trade is 6 cents or $300.00 plus trade costs and fees. One can offer the strangle at 30 cents pre-report, to see if the December Corn market breaks below 6.60, or rallies well above 7.00.
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