The story for months has been slack demand for Agriculture and increasing global production. Hence wheat currently trading under three year lows and corn trading under 2 year lows. Soybean oil has not escaped the black cloud that has been hanging over this sector either as seen on chart below clearly there has been a down trend in place for 7 months. 38.00 has held the last two days in May futures but it is premature to call an interim for now. It will take a settlement above the 9 day MA (green line) for confirmation and likely a jump in volume.
Gaining exposure ahead of tomorrow USDA is bold so tread lightly until we get confirmation. Traders more risk averse may opt to wait for release of the number…given confirmation or getting long at lower levels?
Soybean Oil Futures Trade ideas:
- Purchase out of the money call options. May 40 calls have 106 days until expiration. The delta is currently at 32. Current premium $415 per. Those looking for more time could look to July contracts. 162 days until expiration. July 41 calls could be purchased for $500 with a current delta of 31%. From current trade I would use a 5-7% appreciation to look for an exit door.
- Long May futures and buy a put to serve as a safety net 1:1. 38 put would cost $725, delta of 46%. The 37 put would cost $480, current delta 35%.
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