We are currently seeing many commodity markets trading at or near historic highs. Knowing that actually picking market tops is nearly impossible, we are starting to build short positions with either limited or at least ”cushioned” risk in several markets.
December Corn recently gapped higher based upon an unexpected short fall in harvest expectations. We don’t really buy that but feel that the recent run higher is more due to the weakness in the dollar. We feel that there may be a surge in producer selling as soon as prices stumble. Recognizing that this may not be the “top” we are buying limited risk puts like the December 500 put for $250. We feel that the market could revisit the mid to low four dollar range as harvest progresses.
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There is a substantial risk of loss in trading futures and options.
PLACING CONTINGENT ORDERS SUCH AS “STOP LOSS” OR “STOP LIMIT” ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.
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FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION OF THE UNDERLYING FUTURES CONTRACT.