Commentary
It is my belief that the Trade continues to watch for signs of progress in resuming grain shipments out of Ukraine. A Turkish official said all the details had been worked out for a resumption of Ukrainian grain exports via Black Sea ports, including a safe route for ships that will not require the clearing of sea mines. The market continues to lack much conviction with end-users continuing to sit on their hands until they are convinced, wheat is moving higher in my opinion. A story out late in today’s session reported Egypt cancelled 240,000 tonnes of Ukrainian wheat that was for shipment this past Feb/March which possibly pressured the market late. However, values recovered somewhat into the close as the wheat mentioned was not delivered just due to the war and Egypt just allowed their suppliers out of their contractual obligations for this grain. It is my opinion that Russia remains committed to its stated objective of taking control of southern Ukraine, including the ports, and that it has nothing to benefit from allowing grain to flow out that would help finance Ukraine’s ability to defend itself. With this in mind, I suggest the following trade.
Trade Idea
Futures-N/A
Options- Buy the October 22 KC wheat 9.00 call and selling the December 22 Kansas City wheat 10.00 call for a 2-cent debit plus commissions and fees. Symbol here: KEZ22C1000:V22C900[DG]
Risk/Reward
Futures-N/A
Options-Unlimited risk here as one is buying an October call option while selling a December call with an expiration approximately 2 months later. This is a volatility play utilizing the buying of a near term closer to the money call option, while selling a deferred call option $1.00 higher. Note: As we enter into the trade as a spread, we exit as a spread. I would exit by Labor Day weekend, should we not see the underlying December futures contract trade over $9.00 at that time. One could utilize a GTC stop loss at 8 cents Over, which risks approximately 10 cents upon entry or $500.00 plus commissions and fees.
Please join me every Thursday at 3pm Central for a free grain and livestock webinar. We discuss supply, demand, weather, and the charts. Sign Up Now
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
53 W Jackson Suite 750
Chicago, Il 60604