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Veteran Advisor

Anyone For A Strangle?

An analyst is considering that corn is in a channel and recommending a strangle.  Sell out of the money puts and out of the money calls.

I've never strangled the corn market on purpose.

Anyone consider this tactic?

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7 Replies
Advisor

Re: Never sell a put, Never sell a call,

if your thinking bout  either...just buy or sell a live future.

 

heck selling a put and or selling a call basically amounts to a naked live futures contract that is subject to margin calls thus Needs Baby sitting.

( might Need a bunch more cash put in,  just in case 1's previous  "wisdom" turns out Dumb too ).

 

 

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Honored Advisor

Re: Never sell a put, Never sell a call,

It is a Christmas gift to the broker..

 

Thank you for being so generous.

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Veteran Advisor

Re: Never sell a put, Never sell a call,

This was the broker on the home page a day or two ago.  The objective would be to take the dime or so on each trade with the idea that it would never go against you.  Corn is in a channel.  (I assume one would have to keep a close eye on it or have some stops.)  You'd be up the 20 cents minus the 2-3 cents commission.

 

Just curious if anyone on the site had done any of them.  Sounds like not.

 

One of my handicaps to doing this is it seemsm to take a lot of attention.  On hedges, I often put them on and don't pay any attention for weeks or months.

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Honored Advisor

Re: Never sell a put, Never sell a call,

Jim the volatility the last several years has made the idea hard to count on... It would take weeks of sideways trading to make it work without a breakout loss.

 

It is one of those things that is intended to create broker traffic at a time when there is just not much opportunity or reason to hedge.   Temptation to speculate on lack of volatility while we wait for the market to create some opportunity....

 

Also basis is telling us the market is not optomistic.  We still here doubt of market strength while the exports run in very strong numbers.

 

The "cancelation" of purchases issue always gets spun backwards...  Often the delivery that gets canceled or diverted happens because beans can be bought elsewhere cheaper..... So cheaper markets create the cancelation rather than the common "media spin" of cancelations cause cheaper markets...

IMO that is why the syngenta suits hasn't got a leg to stand on.  It is all speculation on where the market might have been if........... 

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Honored Advisor

Re: Never sell a put, Never sell a call,

Strangle, just a hanging without the sudden drop and stop.

 

Just go to your local casino, your chances may actually be better there. Foods not bad either. The rooms up on the top floor at Riverside are really nice.

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Esteemed Advisor

Re: Anyone For A Strangle?

A scientific answer would be that you want to be careful selling options in periods of low volitility. Selling calls right now is doing just that. Expecting this incredibly flat market to continue is not statistically a good idea.

 

Plus, in taking no position in terms of expected price trend, you are actually taking 2 positions. Not our idea of a plan we like. Especially if you are a farmer with a bin full of grain. Selling calls is a good way to capture the carry on inventory, but adding the put makes you double long counting the cash position.

 

On December 1st, to hedge feed needs, we sold Jan corn and wheat puts ATM, and bought ATM Jan calls. Already have exited the puts for enough to pay for the calls, so it is a free investment now with a strong seasonal tendency behind it. Nothing works all the time, but this seemed like a safe investment with the way the market collapsed into FND. Easiest train to see coming for over 3 months. 

 

But like someone said, we only take a position based upon expected price movement, we never expect the price not to move. Look at a chart, it seldom doesn't move. jmo

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Veteran Advisor

Re: Never sell a put, Never sell a call,

Hobby  -       Triple   -  EXCELL  -   maybe  a  couple  of  pick  5  tickets  for  dessert  ---  

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