Commentary
The dead cat bounce that we saw on Friday in wheat and during last night’s opening Sunday night session could not hold into Fridays close, while we made new lows during today’s session with values posting new multi-month lows into the close. It looks like to me that the rug has been pulled out from under the bull campaign with buyers few and far between until we can see values stabilize. USDA reported 352,404 MT of wheat inspected for export during the week ended June 23, up from 348,309 MT the previous week. Lack of demand for both inspection and sales for futures shipment is not aiding price in my view. On one hand, the grain markets appear to have factored into prices that Ukraine grain supplies being cut off for months with traders shrugging off on-again, off-again discussions between Russia, Ukraine and the U.N. to allow the war-torn country to ship its grain to world markets. With those market fundamentals apparently factored into futures prices, it could lead wheat vulnerable to still more downside price pressure in the coming weeks. That said harvest is advancing rapidly both here in the US and EU while conditions for Spring wheat look better than advertised versus an unknown just a month ago. In my view some production questions have been answered in the wheat market in North America and therefore a decline in futures prices. However, I don’t think a rebound or rally in the wheat is over yet, once we get past 50 to 60 percent harvested, and if the war rages on in Eastern Europe, I look for a potential harvest low and bounce. Trade idea below.
Trade Ideas
Futures-N/A
Options-Buy the Chicago wheat October 10.00 call option and sell the December Chicago wheat option 11.00 call as a diagonal option spread. Bid 5 cents upon entry or better. KEZ22C1100:V22C1000[DG]
Risk/Reward
Futures-N/A
Options-both options are bound of the December futures contract. There is unlimited risk here. Note: if we enter this position as a spread, one should exit as a spread. This is because the long option expires in late September, while the short call option expires in late November. The suggested entry is 5 cents or $250 dollars plus commissions and fees. One should put a stop loss at 15 cents on this spread which risks approximately 10 cents plus commissions and fees. The goal is to see wheat rally back up to at or near 11.00 where the long October 22 call trades close to a 1.00 in the money. Call me with questions.
Please join me this 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