Corn has been on a wild bull run but we are clearly seeing signs of a stall. This is likely to be the stall before the fall and we are positioning to capitalize on this pullback by purchasing these cheap near the money puts. Markets usually fall three times faster than they rise so if we break support at 360 we could easily see a slide back to 320 or lower.
Longer term we remain bullish but near term this market needs to correct. We have already seen wheat correct substantially we could see this market really start to pull back and take corn with it.
Trade Recommendation
Buy one January 2007 Corn 340 put for a maximum cost and risk of 5 cents ($250) or less to open a position.
Profit Goal:
Max profit, assuming a 5 cent fill, is unlimited. The break even point at expiration is 335.
Risk Analysis:
Max risk, before commissions and fees, and assuming a 5 cent fill, is $250. This occurs at expiration with March Corn trading above 340.
Derek Frey
Odom & Frey
www.odomandfrey.com
Call us at 1-866-636-6378