Canola

[wheatking16]

There is a lot of blue sky above the recent high.

If new highs are made, then my next levels of interest are 970 and 1018, and will reassess if they are reached.

I have no idea when or if that will happen.

The challenge of being deterministic in a probabilistic world.

[ATTACH]8998[/ATTACH]

Both levels of interest hit.

Time to reassess.

Will the price push to 1150?

[wheatking16]

Still having difficulty with this UI....

Here is the chart with my 1150 level of interest.

[beaverdam]

Nov up $30/t again this morning

Over 1200 in OI

Someone is being made to pay!

todays high, $1037/t

[farming101]

Many thousands of Nov 21 calls expired last Friday. Held on right to end.
And a good many were well in the money.
Cha-ching

[TechAnalyst]

Many thousands of Nov 21 calls expired last Friday. Held on right to end.
And a good many were well in the money.
Cha-ching

This may be a good opportunity to explain how the options and futures would work in such a situation.

Any call options in the money (with strike prices below the Friday Oct 22 closing price) would be auto-executed leaving the option owner with a long futures position at the strike price.

For example, an owner of a Nov canola $700/t call would be long at $700 with Nov canola closing at $929.70/t last Friday.

They could sell the futures at any time and take the profit or have enough margin money on deposit with their broker to hold the position this week.

The trick is today (Oct 29) is First Notice Day (FND) which is when the exchange can begin matching buyers and sellers for delivery. As such, prior to today anyone that was still holding their long futures position would have to have the full value of the position on deposit as a margin requirement. That is $1032/t x the size of the position minimum.

There is also a risk that they would be assigned the canola for delivery.

That is why brokers try to have no one left holding a futures position by FND unless they are wanting to take delivery.

Given that, there may have been some original call option holders having a wild week but most would likely have liquidated their position prior to the fireworks really starting on Wednesday.

Interesting times...

[farming101]

510 Nov 21 calls were active on Sept 16, 2020

On that day the price settled at 19.40/t. Underlying closed at 513.20/t
Fast forward to Oct 22, 2021. 510 Nov 21 calls expired at 419.70. An increase of 400.30/t

Most calls at the 510 strike price were sold/exercised Sep 10-13/21. Price was 343.70 and 351.70
Underlying that day was as low as 850.50. Roughly a one month low.
The remainder were held till expiry

Not all options expire worthless

[TechAnalyst]

Thanks Farming, that's excellent information.

It shows a real life example of how calls can be added for protection when signing a deferred delivery contract (should that happen to have been the case for some of them).

If canola was sold last Sept for fall '21 delivery for $510/t (with $0 basis for simplicity) or $11.56/bu and the producer bought the $510 Nov '21 calls to minimize risk,

The $400/t profit could have been used to bring the net up to $910/t or $20.63/bu Or been used to buy out the contract due to drought wiping out the crop.

Something to consider given the similarities in the production risk for '22 and the attractive pricing bids for next fall delivery.

[Guest]

i found out in july that you can't always sell canola on the last day , if there is no buyer
but my question is , can you always roll it up until the deadline ?
as i said before , i am very marketing handicapped
reason i ask is we had that old crop nexera that was rolled from july from a
+$62 basis to a +$72 on nov futures
we sold it a week before the deadline of oct 28 for $22.87
but the morning of the deadline (oct.28), nov went up $50 and jan only about $5
i think inverse was about $50 , does this mean we could of rolled it and added another approx $47 after fees ,to our basis for jan ?
thanks, signed marketing genius(not) lol

[helmsdale]

[QUOTE=wheatking16;515324]The challenge of being deterministic in a probabilistic world.

That right there should be added to the "quotes" thread thats open!

I like it!

[farming101]

i found out in july that you can't always sell canola on the last day , if there is no buyer
but my question is , can you always roll it up until the deadline ?
as i said before , i am very marketing handicapped
reason i ask is we had that old crop nexera that was rolled from july from a
+$62 basis to a +$72 on nov futures
we sold it a week before the deadline of oct 28 for $22.87
but the morning of the deadline (oct.28), nov went up $50 and jan only about $5
i think inverse was about $50 , does this mean we could of rolled it and added another approx $47 after fees ,to our basis for jan ?
thanks, signed marketing genius(not) lol

To answer our questions.
Yes your contract should state that you can roll up to a certain date. Usually 3 trading days before the futures month that is used. But also, as you mentioned, that is with the caveat that the grainco can offset the sellers request to fix the futures month and establish a price by selling on the appropriate exchange.

When a basis contract is rolled to a farther out futures month, there is often a limit of 3 rolls and up to one year. After that the contract must be priced.
On the day a basis contract is rolled, the basis in the new month will be adjusted to give you the same cash price as if you had sold in the old month.