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Would you mind explaining a little bit about the old crop / new crop? I've seen it mentioned several times in ags market commentary but not found a good definition.
Can you help answer these questions from other members on NexusFi?
From this article:
"
In grains we refer to last year’s crop as old crop. This is the grain supply we grew last year and currently are using. New crop is the next crop supply that we expect to grow. This is the grain that we will be working hard to produce and that will be harvested in the fall.
Under normal market conditions there is usually a premium to the new crop contracts because we do not know how the next growing season will go. This production uncertainty keeps new crop prices higher.
in a bull market the old crop usually moves higher faster and farther then new crop, and in bear markets old crop usually moves lower faster and farther than the new crop.
"
Myrridin mentioned the X (Nov) contract, which is the new crop.
I proposed to sell the Q (Aug) contract Calls, still the old crop. With the above info that would put me more a risk of sharp moves upwards.
I do not worry about running ITM as long as the option is not close to expiration.
Sometimes I even sell options in the money, eg. recently the CZ P400. To me this does make sense in case of low volatility, as a rise of volatility hurts OTM more than ITM or ATM options. And in case I expect only a small move of the underlying, as otherwise I would buy or sell outright futures.
My stops are independent of the strike, if the option is far enough away from expiration date.
Thank you for your very interesting thread Myrrdin. I have read it from the beginning and I think I´ve learnt more than with all the books I´ve read.
I have very little experiece in commodities as I usually sell very OTM Eurostoxx puts.
I have problems understanding the sizing of your positions, as you say you risk 3% of your account in each trade. For example, in the CL spread you have just opened, how much money do you need to open just one lot.
Sorry for my English, and thank you in advanced.
Your English is definitely better than my Spanish ...
One lot has a value of $320 and a margin requirement of approx. $450. (Please check this figure with your broker, as I made a rough guess.)
The number of positions you can sell using my rules obviously depends on the size of your account and on the stop loss. Assuming you have a $100,000 account and risk to double the original value you can sell 9 of these option spreads.
