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Senior Advisor
Posts: 1,208
Registered: ‎05-20-2010

Just for the record....

[ Edited ]

This past week, and even today, has been an excellent TIME to take a position

to capture an increase in corn volatility.

I like long CU19 360 calls @ .32, paying less than 10 cents of time value or premium

for an entire growing season of weather risk, which is very low historically. It is extremely

low in times with declining stocks/use ratios. Your net long price is 3.92 if you want

to calculate it that way.

 

This approach is far superior to buying an OTM call, like a 400 call @ $.16.

Your net long using this option is 4.16, or 24 cents higher, basically your are paying

24 cents for time value, instead of 10 is another way to say it.

 

3/16/19 - 3 days have passed and 558 views and not one comment. I really

love being alone in the deep dark forest...Smiley Wink

Senior Contributor
Posts: 974
Registered: ‎01-03-2015

Re: Just for the record....

I think people are sratching their heads at why you want to be long at 3.92. Not much meat left on the bone at 3.92.
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Senior Advisor
Posts: 1,208
Registered: ‎05-20-2010

Re: Just for the record....

[ Edited ]

CU19 is trading at 3.88, after trending lower for months. I was just

making the point that this was a good place and a great TIME to

get positioned, so that when we have a minimal run, even if only

to 4.20, you can add the 28 cent gain to the 4.20 sale and have a 4.48 sale.  

 

Again, it was just an easy decision because the volatility was/is

very low and something always happens (100%of the years since 1986 anyway)

to create a spike in volatility, and thus this is an almost risk free

strategy.

 

We did alot of this, and based upon the Open Int stats, and large

number of comments here, there are not very many of us in this

particular forest, which was my followup point. Lonely is always good.

 

Not much meat left on the bone at 3.92?????  In our view, that mindset

accurately captures the current market position and agreed upon value

of corn. Which is frankly in error. Corn is extremely cheap by any standard.

And, this mindset is exactly why the upside is far more than 3.92, just an opinion fwiw

 

The corn bear might want to look around the corner at the hog market

for a glimpse of the future. Smiley Very Happy

Senior Advisor
Posts: 1,208
Registered: ‎05-20-2010

Re: Just for the record....

And before some academic even goes there, this strategy is NOT double long.

You are long nothing but the right to purchase something at a set price. You

own some paper that might end up being worthless. Pretty similar to a stock

or a bond come to think of it....

 

The way we calculate it, and everyone can make their own decision how,

is pretty simple.

 

Sept Corn is 3.85, the call cost 33 cents, 

33/385 = 8.57%

Thus, we are long 108.57%, minus any bushels you actually have priced.

 

Claiming it is double long is just as ridiculous as using your cost of production

to decide when to sell something. Especially, when you don't even know what it

us until after you harvest. :-)

Senior Contributor
Posts: 974
Registered: ‎01-03-2015

Re: Just for the record....

"Extremely cheap" Not sure I would say that unless you're expecting a big move, however we may have seen the highs for the year.
Senior Contributor
Posts: 214
Registered: ‎12-04-2010

Re: Just for the record....

Time, thinking about doing some of this strategy.  Think it is too pricey now?