Please join me every Thursday for a free grain webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. Sign Up Now
Commentary
Wheat bounced back today to close slightly higher after double digit losses overnight and early morning trading hours. Buying emerged today in wheat just after the morning bell session began with little selling seen thereafter. Both Corn and wheat were weaker yesterday and overnight amid the headline yesterday Ukraine and Russia would refrain from hitting each other’s energy infrastructure; however, both sides launched attacks overnight eliminating any chance of this occurring. The energy markets provided the spark for the ag sector today with diesel prices hitting new highs and crude well above $100/barrel. On the domestic front, the US Spring wheat harvest is nearly wrapped up, with USDA reporting farmers as 93% finished vs. a 92% 5-year average. Winter wheat plantings continue forward but are slower than average. USDA reports the crop has 8% of intentions planted vs. 12% average for the week. However, better rain chances are showing up in extended forecasts in the next two weeks accompanied by a cooler outlook as intense heat moves out. We could see an increase in seeding should forecasts verify. I see two scenarios I would play in Chicago wheat. Either cooler heads prevail and the war de-escalates and wheat drops 1.00 to 1.30 to 6.00. Or due to the wars continuing escalation keeps the Black Sea shut, which would send the March 27 contract to 9.00 following KC wheat up the page. Trade idea below, option strangle.
Options
Buy the March 27 Chicago wheat 9.00/10.00 call spread for 10 cents. At the same time buy the December 26 wheat 6.00 put for 3 cents. Package the three way strangle as follows. ZWH27C900:1000: Z26P600[1-1+1]
Bid 13 cents OB on a GTC basis on the strangle. Risk no more than 10 cents from entry on a stop loss for a risk of $500 plus commissions and fees. Work to sell the strangle should we get a sizable move at 40 cents for a gain of 27 cents less commission and fees.
Margin -$469.00
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
311 S Wacker Drive Suite 540
Chicago, Il 60606
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 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.