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Stuck between higher demand from China and uncertainty on weather and production from Brazil now that our harvest is done.. any thoughts how the crop progress report on Tue will look?
Looked long today but last week many days was a huge fall.. so looks confused
they said funds prob lightened on their longs still doesnt mean much until we see data from Brazil
On the one hand USDA is known to underestimate final Exports of soybeans in their fall reports. On the other hand large crops tend to get even larger. I expect the soybean price to move sidewards for the next couple of weeks. USDA should not bring a big surprize, too much is already known about the US crop / exports. And not enough about the South American weather.
Currently the weather in South America is cooperating. If weather remains good weather premium will be taken out of the soybean price, perhaps in January. If weather problems begin to be shown in the weather forecast, price will move up quickly.
Currently I hold a strangle (SH C10.40 / SN P9.4). I expect the calls to have a low premium in late December / early January, and intend to buy them back. I will see what to do with the puts - depends on the weather in South America and on the exports.
If I would enter now I would still think about selling a strangle. You could have a look at the January expiry, and try to let them expire worthless (or buy them back at a small premium).
Current positions in the options selling portfolio:
SH C10.40
SN P 9.40
I expect the calls to have a low enough premium to buy them back with a profit of more than 70 % in early January. The fate of the puts will depend on weather in South America and on exports. USDA is known for underestimating exports of soybeans in their reports. If this is the case this year again and / or some weather problems in South America get into the forecasts, the October lows should hold. (I already rolled down / out the calls (SG C11 and SH C11) twice with a profit.)
LHG P46
I sold a first lot (20 % of standard lot size) of the LH P46, and placed further orders for the LH P45, P44, P43, P42. Average price for all orders is 1.25 ($ 500 per option). Seasonals show a strong move downwards in early December. Depending on this move to occor or not this year (hog prices already are very low), I will get more or less positions filled. I expect the October lows to hold.
ESG P1800, ESH P1800
I intend to sell these positions with a profit of 50 %.
ZNF P23.5
Sold a small lot of these options according to a suggestion of Carley.
I did not succeed to get the KCH C200 filled. Now coffee looks oversold, and I hope for a bounce during the holiday week.
Some time ago, I talked about entering Gold puts around 1200. Risk / reward currently is not what I expect it to be. I did not enter this trade, and I am not sure if I will do so in the near future. If $ moves upwards in a similar way, as when Mr. Reagan was elected president, Gold price could move down severely.
Wheat calls looks interesting from a seasonals point of view. But currently prices are too low, and COT data look too bullish. I intend to sell these calls on a move upwards to the 450 - 470 region, if it occurs until end of the year.
I guess are u are still holding your 10.40 calls.. plenty of time
Is there a get out price for beans? or are u seeing correction in Dec.. so u can get out in early Jan
On hogs...with the massive move today..do u expect to get filled on any other puts? So your strategy is to place the puts there in case in Dec it corrects.. and since you think Oct will hold and seasonally Hogs go up... u should be able to get nice premium decay?
Do you have a target on getting out of the Hog puts?
Also if u think Dec will correct? you dont sell calls for short term???
Yes, I am still holding the strangle consisting of the SH C10.4 and the SN P9.4 . Including the profits from rolling down and rolling out the calls, the loss of the trade is currently less than 20 % for the strangle.
COT data look bearish, large sprecs are long. I assume that they will be reported with more than 150,000 long positions at the end of this week. Since 2006, they held more long positions at the end of the year only once (2010).
Seasonals for the most recent 10 years show upwards in December. But among the five years since 2006 when SH was below 11.00 at this time of the year they show upwards only once (SH09 contract). The old saying "Big crops get bigger" seems to be reflected here.
Acreage will be an important topic soon. According to Hightower, analysts talk about a shift of 2 mio. acres from corn to soybeans. This is bearish soybeans.
The strong US-$ and the weak Brazilian Real should pressure soybean prices.
Exports are huge, and these exports, together with the introduction of a weather premium for South America, are currently driving prices higher. But export business should shift to South America soon. According to "Daniels Trading" "the offers in Brazil are cheaper than US offers out in January".
The major open question is the development of weather in South America. Planting in Brazil is extremely fast, in Argentina it is slow. Forecasts currently are excellent, but this may change. But: each day with a good weather forecast brings us closer to harvest.
I intend to hold the position as long there is no close above the October high. But I might hold the position even if such close occurs. When the August high was taken out on 22nd of October, the turn around came the next day. In case I liquidate the current strangle I intend to roll it to a higher price level. I still believe that soybean prices will move sidewards / lower for the next couple of weeks, as long as there is no major shift in South American weather.
My problem is that I am not sure if the move downwards in December will occur this year or not. There are good arguments for it to occur (seasonals, assumption of lower exports to Mexico due to the low Peso and to China due to the high US-$). But Prices are already very low compared to earlier years.
Yes, my strategy is as you describe it. But currently I am not sure that I will be filled on further contracts. I bought back the small position yesterday with a nice profit.
I do not intend to sell calls for the short term. In case the move downwards in December does not occur this year, these calls quickly would cause problems.
I notice your short side is July SN9.4.. i am assuming since you are thinking of the big crop and the slide that can occur... but if you plan is to close out in early Jan or so.. why July puts? or will u close out the call side and just roll it to whatever appropriate and keep the July put side?
Note: As usual thanks for your comments/explanation - very helpful. i really wish i could trade strangles instead of spreads.. i can technically but just something holding be back
You are welcome. It helps my trading to exchange my thoughts.
I am still not sure how to procede with the puts. The most probable scenario for me is that South American weather is good, but not perfect, and that exports will remain high, but not as high as currently (a significant part of the export business should move to South America). Prices might come down again, but not too far. If the August low, which is approx. 1 $ below the current price, holds, I might let the calls expire worthless, and keep the July puts.
Since 2006, the SN contract only once moved below 950 between November and end of March, if it was above 1000 at the end of November (SN10 contract).
Why I chose the July contracts ? The reason was that I wanted to be approx. Delta neutral. I could have chosen the March puts, but either had to sell very many of them or have a uncomfortably high strike price.
There are some uncertainties regarding soybean prices. There are influences moving the prices up, and others moving them down. I like selling strangles in such environment, as you can hold the position quite long without substantial losses. But the risk is on both sides. I recognize the problem of selling options with so many DTE.
