Picking a Bottom in Ags – Soybean oil

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 chart for January 9, 2013

Soybean oil futures chart for January 9, 2013

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%.

Click on link to purchase Research:

Bradbard Research

As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 312-870-1653

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.
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