Beans continue their upward ascent as announcements of China returning to the US market buying beans spiked spot bean contracts past summer highs to trade to 9.28 this morning. Like most other markets, beans pulled back by the close, settling just above a key trend line 919.2, closing at 9.20. A flash sales announcement of 110,000 metric tons of soybeans for delivery to unknown destinations during the 18/19 marketing year was announced this morning as well. This sale added fuel to the fire for the bulls this AM and gave some validity to early morning rumors from those in the cash market that this is only the beginning. Keep in mind flash sales announcements from the USDA are sales for future shipment. China can always cancel these future sales at anytime as that has been their M.O. for years should South America grow a big crop.
A fifty percent retracement for beans for the calendar year could spur funds to rally this market to 9.47, should managed funds continue to short-cover regarding better demand prospects. In my view, should today’s high not be surpassed ,the rally from 8.58, the low prior to the G-20 in Argentina, to today’s high at 9.28 (70 cents), could see a 50% retrace back down to 896/97 basis Jan beans. I’m looking at deferred bean contracts specifically July 19 beans sitting just below 9.60. Should they test 9.75 /9.80 consider the following trade.
Buy the July 940 put for 28 cents. Sell 2 of the July 11.00 calls for for 14 cents apiece OB. Spread cost is even money plus commissions and fees.
Near term-buy the Feb 9.00 bean put. Sell the Feb bean 10.00 call. Cost to entry 1 cent plus commissions and fees. Spread settled 4.4 cents today, so futures need to rally ten cents to get the order filled for 1 cent.
Both strategies are aggressive, very risky, and for me make more sense for those holding beans (the producer) using the options for hedge rather than speculation. I’m aware that the USDA released their monthly report yesterday, but since they failed to report on production for corn/beans and threw darts on the wall regarding ending stocks for both, I will refrain from commenting. Please call or email me with questions or comments on speculative and hedge ideas. 888 391 7894 or email slusk@walshtrading.com
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