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Time to (hopefully) waste money on soybean puts?

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    Time to (hopefully) waste money on soybean puts?

    For those so inclined, it may be a good time to purchase soybean put options and hope they expire worthless.

    I believe the canola market gave us insight to what impact China may have on the rest of the ag markets before this is all over.

    Soybeans and corn prices had been building a good base over the winter in anticipation of a deal between the US and China. Recently China talked about a $30 bil increase in purchases of US agricultural products as part of a deal. This would have significant impacts as the record annual purchases had been $24 bil. This is the part about you hoping the put options expire worthless with a major deal getting done.

    The problem is, traders are getting nervous that the wheels may be falling off the bus behind closed doors.

    The daily soybean chart is rolling over, turning decidedly bearish in the short term. The weekly chart had a sell signal given by technical indicators. These combined suggest last years low of $8.14 could be tested if China walks away from the deal. For those interested, May soybeans closed today at $8.95.

    I realize most producers in Western Canada don't grow soybeans but should that market drop close to a $1/bu US from here, it won't help canola at all. It's too late to do anything about the last Chinese smack but at least soybean puts would help from being hurt further should China back away.

    As far as the cost, the better the coverage, the more the premium. As of Friday, July $8.80 puts closed at $.14/bu, $8.60's at $.085 and $8.40's at $.04 7/8.

    For anyone interested, corn is in the same boat but should have less downside risk and more upside potential (should a deal be concluded).

    Just a thought...

    #2
    I agree. 880's were 9 cents on Monday. But this setup certainly is saying better now than never.

    860's @ 8.5 cents, decent

    Comment


      #3
      Canola puts have been excellent protection . . . .

      Comment


        #4
        Black Swan events .....China closing it's doors ...

        I guess a guy should have known after the Huawei arrest....but that wasn't agriculture related....

        Excellent...

        Comment


          #5
          ZSN19 options

          900 puts 14.375 cents
          880 puts 8.5 cents
          860 puts 4.75 cents
          840 puts 2.625 cents

          July canola puts will be higher tomorrow
          closed today @
          470 puts $7.20/t
          465 puts $5.50/t
          460 puts $4.20/t

          Comment


            #6
            Good ideas TechAnalyst and 101.

            Comment


              #7
              FRIDAY UPDATE

              ZSN19 options

              900 puts 14.375 cents, closed Friday 16.25¢ up 1.875 or 13%
              880 puts 8.5 cents, closed Friday 9.5¢ up 1 or 11.8%
              860 puts 4.75 cents closed Friday 5.25¢ up .5 or 10.5%
              840 puts 2.625 cents closed Friday 2.75¢ up .125 or 4.8%

              July canola puts will be higher tomorrow
              closed today @
              470 puts $7.20/t, closed Friday $14.10 up 6.90 or 95.8%
              465 puts $5.50/t, closed Friday $11.10 up 5.60 or 101.8%
              460 puts $4.20/t, closed Friday $8.60 up 4.40 or 104.8%

              Comment


                #8
                March 27 update compared to Mar 21 close

                ZSN19 options

                900 puts 14.375 cents, closed Mar 27@ 22.125 up 7.75 or 53.9%
                880 puts 8.5 cents, closed Mar 27@ 13.375 up 4.875 or 57.4%
                860 puts 4.75 cents, closed Mar 27@ 7.375 up 2.625 or 55.3%
                840 puts 2.625 cents, closed Mar 27@ 4.000 up 1.375 or 52.4%

                July canola puts
                closed today @
                470 puts $7.20/t, closed Mar 27@ 19.60 up 12.40 or 172.2%
                465 puts $5.50/t, closed Mar 27@ 15.30 up 9.80 or 178.2%
                460 puts $4.20/t, closed Mar 27@ 11.40 up 7.20 or 171.4%

                Comment


                  #9
                  I realize options are unpopular with many but they can be an important risk management tool (as this has shown).

                  They are very similar to insurance. You hate wasting money on them. You don't want to collect on them as they never make you completely whole (unless you're over insured). But you are glad they're there if you need them.

                  Case in point, tomorrow mornings USDA reports. We all hope to not see a bearish surprise but if a person had these in place, it would relieve a great deal of pressure and anxiety over the outcome.

                  Comment


                    #10
                    Originally posted by bucket View Post
                    Black Swan events .....China closing it's doors ...

                    I guess a guy should have known after the Huawei arrest....but that wasn't agriculture related....

                    Excellent...
                    Not so fast there bucket, same story in cattle. Canada is a pretty good country to dump contracts for as they know we won't do anything.

                    https://ipolitics.ca/2019/03/28/top-usda-official-suspects-chinas-deadly-hog-disease-outbreak-much-much-worse-than-reported/ https://ipolitics.ca/2019/03/28/top-usda-official-suspects-chinas-deadly-hog-disease-outbreak-much-much-worse-than-reported/

                    Comment


                      #11
                      April 26 update compared to Mar 21 close

                      ZSN19 options

                      900 puts 14.375 cents, closed Apr 26@ 40 up 25.625 or 278.3%
                      880 puts 8.5 cents, closed Apr 26@ 25.875 up 17.375 or 304.4%
                      860 puts 4.75 cents, closed Apr 26@ 14.25 up 9.5 or 300%
                      840 puts 2.625 cents, closed Apr 26@ 8.375 up 5.75 or 319%

                      July canola puts

                      470 puts $7.20/t, closed Apr 26@ 26.10 up 18.90 or 362.5%
                      465 puts $5.50/t, closed Apr 26@ 21.80 up 16.30 or 396.4%
                      460 puts $4.20/t, closed Apr 26@ 17.70 up 13.50 or 421.4%

                      Comment


                        #12
                        Brought this forward to update current values.

                        It may be the time has passed to get in on July options

                        Comment


                          #13
                          Many growers own better quality canola put options.

                          November $510 puts @ $52/MT
                          November $500 puts @ $43/MT
                          November $490 puts @ $34/MT

                          Many Nov $500 puts were purchased as price protection between $17 to $21/MT. Recommend maintaining positions for price ongoing canola price protection.

                          Example: Nov $500 put option - $18/MT premium = $482/MT ($10.90/bu) - delivered fall basis = net protection. With put options, you are not tied to a gov't program, no production or delivery obligation.
                          You are master of your own destiny . . . this is a solid tool for your marketing toolbox.

                          Comment


                            #14
                            Obviously the guy from the WCWGA that testified in front of the AG committee that believes in the open market didn't follow that advice....because he said he was out 50000 on his stored canola.....

                            Comment


                              #15
                              With this developing in real time, I would like to highlight another benefit of using options in your risk management strategy for those interested.

                              Because you can buy or sell the options at any time, you can actually pull some money out of them as the market falls while retaining your protection.

                              Using Errol's example, the November $500 put options are now $40 in the money. That is, the market is now about $460/t so if you exercised your option to be short at $500, you would have a $40/t profitable position.

                              Today you could sell the $500 put for $43/t and buy a $470 put for $19/t. You get the $24/t net deposited in your account which more than covers the original cost of the option (insurance). You now have free price insurance protecting you from a market move below $470/t Nov futures.

                              You could do this as many times as you wish if prices continue to fall in the short run with a hope that long before November the market reverses on a Chinese resolution or production issue somewhere (or whatever it takes).

                              It would be a bit like being able to get paid 80% of an expected crop insurance claim in the middle of a drought with the potential for the crop to recover by harvest.

                              Just something to think about...

                              Comment

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