Commentary
The November contract posted its second weekly decline in the past three, a potential warning sign for market bulls hoping for another run at the June contract highs. Hot
weather on top of persistent dryness in the eastern Dakotas and other growing areas remains concerning, and an argument can still be made the market’s longer-term
uptrend remains intact. But recent export news has been a bit uninspiring, and upside momentum appears to be waning, as often happens this time of year in my opinion. USDA’s Aug. 12
Crop Production Report looms as a tone-setter for the remainder of summer, though weather during the podding and filling period will have a say over price direction in my view.
Those looking for downside protection may consider the following option 3 way trade. I am buying a put and selling a call spread to finance. Call me with questions.
Trade Idea
Futures-N/A
Options- buy the Oct soybean 12.00 put and sell the October 11.00/12.00 call spread. Bid -85 cents upon entry.
Risk/Reward
Futures-N/A
Options-the strategy collects 85 cents upon entry or $4250.00 minus commissions and fees. The maximum loss is 1.00 or 5K plus trade costs and fees. Collecting 85 cents from the maximum (1.00),puts risk on this trade at 15 cents or 750.00 plus trade costs and fees. If we don’t see a sizable break by Labor Day in the bean market, or if we see a sizable rally that takes out major resistance at 1432. (see Chart), I advise getting out. Caution is advised here.
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Sean Lusk
Vice President Commercial Hedging Division
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