Medium term
Trade view / 27 June 2016 at 14:32 GMT

Corn options may be ripe for pick-up

Product Manager, Options Trader, Educator
Instrument: CORNSEP16
Price target:
Market price:

We don't need to go into a deep discussion of what 's driven prices of agricultural products for the past six months. There were forecasts of drought extending in South America, particularly in Brazil and Argentina, earlier this year. Let's leave it simply at demand. For this trade we are going to lean a little more on technical analysis. 

Corn prices are up 5.3% since the beginning of the year, which is modest in comparison with the clear rockstar, soybeans, up 27.5% year-to-date relative underperformance is due to a recent 12% pullback from its June 17 pullback. The price seems to be stabilising near current levels of $390 and volume increasing.

Corn Daily  Source: Saxo Bank

The trade set-up is conditional upon the price of corn moving above Friday's intraday high of $395. Today, Monday, the price of corn traded as high as $396.75 in the earlier session but has sinced retraced. Traders should confirm the break at the market close (options on CBOT close at 1:15 pm CST, or 8:15 pm CET)

Management and risk description

Allocate a percentage of your account value that you are comfortable risking. For instance 1% of $50,000 is $500.


Upon a close above $395:

Underlying: September corn (ZCU6) at $393.75

Buy 1 Sep 16 390 Call at 22 
Sell 1 Sep 16 420 Call at 13
Net debit   9 x 50  or 450.

Breakeven at expiration: 399

Maximum gain at expiration: 21 x 50 = 1,050.

Maximum loss at expiration: 9 x 50 = 450.

Entry: MOC order ZCU6> 395.

Target: Price to trade above 420.

Time horizon: 20-30 days.

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more
Feders Feders
Hello Georgio, today Corn closed at 379. This price change the entry point for the spread proposed here?, or this trade is not longer valid with this price move?
Georgio Stoev Georgio Stoev
Hi Feders, we never got an entry on this one, as price on Monday closed below the trigger $395
Feders Feders


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