Breakdown: I bought the CORN October 43 Straddle for $2.90
Profitable – I make money on this trade if CORN closes below $40.10 or above $45.90 by October 21, 2011.
Break-even – If CORN closes at $40.10 or $45.90 by October expiration, I will break-even.
Unprofitable – If CORN between $40.10-$45.90, I can only lose the maximum amount I paid for this spread, $2.90.
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The reason I like this trade: Corn has been getting crushed lately along with the global growth slowdown. I want to play the movement, not to pick a direction. The CORN is an ETF that seeks to replicate, net of expenses, the daily changes in percentage terms of a weighted average of the closing settlement prices for three futures contracts for corn that are traded on the CBOT, specifically (1) the second-to-expire CBOT corn futures contract, weighted 35%, (2) the third-to-expire CBOT corn futures contract, weighted 30%, and (3) the CBOT corn futures contract expiring in the December following the expiration month of the third-to-expire contract, weighted 35%. The fund will invest in corn futures contracts. It may also invest in corn-based swap agreements, short-term obligations of the US government and/or cash equivalents. It has been moving by almost $1 everyday, so I think this is the perfect time to own premium to play the movements. I think it might have bottomed at $43 and will retrace back to $49, but this strategy always me to profit with any movement. Please email me with any questions about this trade at Andrew@KeeneOnTheMarket.com.
