cancel
Showing results for 
Search instead for 
Did you mean: 
protrader
Contributor

Sell some calls.

At one point today, Mar'11 800 corn calls were trading at 7 cents.  Seems like selling some calls at this level will yield some comparatively riskless profit.

 

Anyone utilizing any synthetic positions to hedge naturally long positions? It kind of seems like there are some opportunities here if you have a chance to research it.

0 Kudos
5 Replies
GoredHusker
Senior Contributor

Re: Sell some calls.

While I don't necessarily disagree with the position of selling $8.00 calls, I do disagree with the timing.  The RSI stands at less than 30 meaning the market is right at being oversold.  Why not wait for some type of recovery maybe like a 50% retracement before selling the call?  This would put the market around the $5.70 area which if this happens sometime soon should yield closer to 9 to 10 cents. 

0 Kudos
Mike M2692830
Frequent Contributor

Re: Sell some calls.

I cover sales made with call spreads. I am confused with your thinking that a 8.00 call sold for .07 is worth anything more than .07. Post again and help me out with your plans here. I do remember back in 08 when corn was trading around that $7 level in the upcoming Dec month. I looked at buying some $5 puts for around .05 in June. Figured it was probably a waste of a nickle. We would of been happy to have $5 corn in Dec of 08.....MikeM

0 Kudos
protrader
Contributor

Re: Sell some calls.

By selling calls, I am suggesting a speculative position (of course this is just my opinion- have to cover the bases on that) but by selling some calls at the 8.00 strike for ~7cents you're selling the right to buy corn for $8.  Unfortunately, I don't think we'll ever see (not in this marketing year anyway) $8.00 corn, so this seems like a comparatively riskless transaction that you can use to get a few extra cents per bushel.

 

I have to agree, however with GoredHusker, in that the market is practically sold out and that it might be wise to wait for a bit of a recovery to maybe...mid to high 5's (5.60 target -ish) where you can then command a higher premium for mar'11 calls.

0 Kudos
Artifice
Veteran Contributor

Re: Sell some calls.

thre is no such thing as risk free

 

a spec position is a spec position.

 

long tail risk, of course 12-1 you keep teh 7 cents, 1 time you don't.

 

some get some complex hedging, they are not hedging.

 

you cannot have both upside and downside.

0 Kudos
GoredHusker
Senior Contributor

Re: Sell some calls.

I believe they state comparitively riskless.  This is a lot different than saying it is a risk free trade.  I've often wondered why it is said that selling options risk is unlimited.  I'd say that selling puts there is definitely a limited risk.  I've yet to ever see a commodity market where the value went negative.  I know I sure wouldn't pay someone to take my corn. 

0 Kudos