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Commentary
Bean prices closed slightly weaker, caught in the middle of a strong bean oil rally and the selloff in soybean meal. Trump’s tariff talk has encouraged ideas of additional bean oil demand if used cooking oil imports are halted. More demand for bean oil possibly keeps crush rates high and risks excess meal production. Seasonally, bean prices retain a bid into and through most of December in my opinion, however you can throw that out if there are no weather threats from South America while this tariff talk remains active. The tariff talk has been much more aggressive on the border at 25 % vs 10% additional against China. Long term trade idea below. Lots of noise here but in my view, it leans bearish
Trade Ideas
Options-Buy the March 25 soybean 10.00 put. Sell the 12.00/1160 January 26 put spread for even money minus trade costs and fees.
Risk
The risk is 40 cents total plus trade costs and fees. We are packaging 3 options, buying puts and selling put spreads for the same price. I’m buying downside for the next 90 days, while going long on a defined risk spread of approximately 10 cents that expires in 13 months. Outright 10.00 put risk is approx..30 cents, while the short put spread for January 26 max risk is 10 cents plus trade costs and fees. We are looking for a breakdown in price from high 900’s to the August lows at 955. Should that happen cover the premium on the 10.00 March 25 put. Hold the short put spread as hedge against t a bean rally next Summer. I would exit if March bean puts on a close above 10.30. Call me with questions.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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