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03-13-2019 07:27 PM - edited 03-16-2019 05:00 PM
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...
03-20-2019 02:35 PM - edited 03-20-2019 02:38 PM
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
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.
03-20-2019 03:13 PM
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. :-)