$12 July canola...

[iceman]

Jan 31 2017
[ATTACH]1165[/ATTACH]

That ends that discussion. Thanks for the charts.

Any thoughts on beans in the short term? Will be see a small bounce before we head lower?


Iceman out

[furrowtickler]

Agreed , thx for the charts 101 👍

[farming101]

Bean uptrend still alive. A bounce off 10.13H would be positive. It's looking like the Jan 18 high will not be taken out. Possibly 10.36-10.60 as a high.
Continued weakness for the rest of this week will put that all in doubt. anything under $10 will find new selling

[farmaholic]

Am I the only one who needs an explanation allot of the time? Or the only one ______ enough to admit it?

[farming101]

Fire away

[farmaholic]

What am I supposed to be learning from the canola-bean oil chart. Why are canola puts still rising and bean oil's coming down.

Why 10 and 50. Approx equivalent value

What else?

[farming101]

The chart is tracking the value of a relatively equal (to start with) put purchase

10 bean oil puts tied to the July contract, 50 canola puts tied to the July contract
The 490,495,500 are the strike prices for canola
34 cents is the strike price for bean oil
The bean oil value dropped today because it took a breather from its sharp downturn as of late
Canola kept dropping so the put increased a little in value
There is also a conversion to CAD for bean oil with the dollar value at noon on the Forex
One bean oil put option gives you the opportunity to short one July beanoil contract at the 34 cents(60,000 lb)
One canola put option gives you the opportunity to short one July canola contract at the strike price (20 tonnes)

[farmaholic]

On your chart, when would you "get in" and what was the initial cost of each contract at the time?




Today:

A July $520 canola put is supposedly costing about $19 bucks.... so is that basically $380 to protect a twenty tonne July contract at $520.

43 cents a bushel.

So you would have to basically get $539 to break even(cover the cost of the put).

But if canola would drop and the put increase in value.... does it basically increase in value equivalent to the drop in canola price?

[farming101]

First pick a time to shop for put options when the futures values have been on the rise. Volatility causes option prices to increase. Quiet markets cause options to decrease in value.
The other part of the plan is old crop or new crop. Time is a factor. The further out you go the more premium there is for covering future risk. (a guy can always move the options around but that is more commission).
Initial cost on Jan 20 was
490 strike - 104(5.20/t)
495 strike - 124(6.20/t)
On Jan 24 the 500 strike had dropped to 126(6.30/t) so I included it.

To break even the option has to go into the money enough to offset your option premium plus commissions. So in your example you would be looking at July futures sub 500 to make anything off it. You have the right to sell a July at 520 but you would only do that if it's a money maker.

Options value increases or decreases are not one to one. Time is an important factor as well as how far in or out of the money the strike price is.

[Oliver88]

Canola slide appears to have paused for today anyways.
Up $3/tonne today.