We mentioned on Tuesday (10.30) that news on trade with China could enter into the market at anytime in the form of a tweet or other social media forum that could prop up grains at a moments notice. We witnessed just that yesterday from the President. If only our predictions resulted in guessing the correct Power and Mega ball numbers. The market rallied overnight on further noise over trade frameworks being constructed while other Senior White House officials later tempered the talk. The soybean market took notice today both ways. The market rallied 30 cents on Thursday after the tweet. Beans rallied another 20 cents overnight into Friday morning. They then gave twenty cents back and finished the day up six cents while finishing the week up 36 cents. Wild action to say the least but it again displays the hyper sensitivity the soy market has to potential demand back in the market from our number one buyer. These are trading markets with countless opportunities in my view. Producers have to be happier than they were just a few sessions ago and are probably urging the President to keep tweeting through harvest. Hopefully this isn’t just hocus-pocus in front of key mid term elections regarding trade. If the euphoria of being closer to a deal with China ends up being a rug pull resulting into nothing meaningful for trade at mo after the G 20, or by year end, then prices could fall below 8.00. We could finish the year down 20 percent at 765 prior to the January 2019 crop report. However should we get some headway here with tariffs reduced or removed, I look for funds to rally beans to at least half way back to the 950 level. My advice is to make bets both ways for relatively inexpensive cost because I don’t see the market as range bound. In some ways here the President has ensured that with his mobile device. Just my opinion here but consider the following for hedgers and speculators alike.
Bean Option Strangle:
Buy the Jan 19 940 call for 6 cents, Sell 2 of the Jan 990 calls for 3.2 cents a piece. Collect a half penny. Buy the Feb 820 put for 4 cents. Cost is 3.4 cents plus 3 commissions and fees. There’s major risk over 10.00 basis January as we are short an extra call. While I like the odds of that not happening, never say never in these markets and expect the unexpected. I can adjust the Jan call ratio if need be to pay nothing for the whole strangle upon entry.
Call or email me with questions at 888 391 7894 or email me at slusk@walshtrading.com
I hold a weekly grain and livestock webinar each Thursday at 3 pm Central. We discuss supply, demand, weather, technical set-ups, and trade ideas. A recording link will be sent to your email.