Sell canola buy calls?

[Ronski]

I still have half my canola and barley to price and I'm debating pulling the trigger. its very early but I have never sold crop at these prices before (12.50 canola and 5.50 feed barley) and I'm tempted to clear the bins and buy paper.
I haven't used my trading account in a decade, does canola have enough volume to buy a call option or should I go with beans and corn?
I don't need the cash now but remember when elevators went "no bid" a few years ago due to rail issues. Don't expect that to happen but with covid who knows when shit could go sideways. Am I better off with bins full of grain or fertilizer this winter?

[TASFarms]

Didn’t a fund get caught with Canola futures awhile back. It’s easy to make a futures contract for you to buy. It’s another thing tryn to sell it

[farmaholic]

When things are at the upper end of historical trading ranges, what is the best paper strategy?

How about locking in some future production if things continue to escalate? Its a gamble too.

Is there enough liquidity on ICE canola to play with options?

I'm not experienced in options at all.

[blackpowder]

You're not the only one with these nagging thoughts. One terminal here just offered $13 for immediate.
Hedge account advise/strategy, basis, $.05/mo interest cost, carry. What exactly is that light at the end of the tunnel?
A sweet basis offsets cost of options and operating interest?? Dunno.
Selling every kernel in Nov does seem pre mature but...
By not selling we're looking for $14 in May????

[furrowtickler]

It’s on everyone’s mind here as well .
Given the current situation globally it’s unnerving to say the least .
China had to come in a buy big , everywhere. Their main crop production area was flooded tremendously In July and virtually nothing was said .
This is part the result , question is how long will it last ?
China coughs , everyone else gets a cold.
If Covid shuts trade down then what ?
Lots of uneasiness right now .
But historically good prices for this time of year. It’s a tough call .
I think we missed the boat on wheat a few weeks ago . Any insight on that would be appreciated.
Barley , canola , pulses all doing what they should in the open market ... reacting to strong demand ... wheat just a blip so far really a few weeks ago

[Oliver88]

When things are at the upper end of historical trading ranges, what is the best paper strategy?

How about locking in some future production if things continue to escalate? Its a gamble too.

Is there enough liquidity on ICE canola to play with options?

I'm not experienced in options at all.

Could soybeans or soybean oil used?

[Braveheart]

You're not the only one with these nagging thoughts. One terminal here just offered $13 for immediate.
Hedge account advise/strategy, basis, $.05/mo interest cost, carry. What exactly is that light at the end of the tunnel?
A sweet basis offsets cost of options and operating interest?? Dunno.
Selling every kernel in Nov does seem pre mature but...
By not selling we're looking for $14 in May????

Or, $10.30 in May. Individual farms need individual strategies. What are your costs and what was the yield? What did it cost per bushel to produce? Selling cash grain and buying paper when the price of canola is 12.50-13.00/ bushel? Not for us here.

However, pricing new crop canola with a deferred delivery contract (around $11.30/bus) and buying an out of the money call option on top of that might be a strategy we'd look at (synthetic put). Might wait a bit to get some of the time value out of it though.

[farming101]

Buying calls is a way to stay in the market. It's not free.
Errol and I had a bit of a set to a few years ago as to the value appreciation of canola options versus Bean Oil options. He likely doesn't remember - just as well.

Anyway, staying in the market is available through calls. Sit down and ask yourself whether or not you're up to tracking options values after just watching the markets for months and months trying to decide when to clean out the bins. Some guys just want some time off from marketing and are okay with missing the last of a perceived rise in prices. Call it a year.

On the other hand, options are a way to limit risk and stay connected to the market. If a guy is going to do it all over again next year you have to watch the markets anyway.

O and don't forget chaos is an intrinsic feature of futures markets

[Marusko]

And where does one trade calls and puts on commodity futures?

[errolanderson]

For growers wanting to replace their cash canola sales with call options, here's a brief rundown on strike prices and ideas on what various call options are worth. Again, these premiums change continually depending on the direction of the futures.

March canola: $570 call @ $14/MT, . . . $580 call @ $10/MT, $590 call @ $8/MT . . . $600 call @$5.50/MT

May canola: $570 call @ $17/MT . . . $580 call @ $13/MT . . . $590 call @ $10/MT . . . $600 call @ $8/MT.

July canola: $570 call @ $19/MT . . . $580 call @ $15/MT . . . $590 call @ $12/MT . . . $600 call @ $9/MT.

Note: Liquidity for July still quite low, May canola options tradable . . . March canola most liquid.

[jamesb]

And where does one trade calls and puts on commodity futures?

For regular options a account with a brokerage. A simple way to do it is option- like product that many of the grain companies have that is essentially an ability to capture a run up in price in the future. In my experience they are real easy to buy but are more expensive than using a standard put or call.

[farming101]

For regular options a account with a brokerage. A simple way to do it is option- like product that many of the grain companies have that is essentially an ability to capture a run up in price in the future. In my experience they are real easy to buy but are more expensive than using a standard put or call.

And of course the actual grain is delivered to same company you made the deal with. Buying an option on the exchange allows you to keep your delivery choices open. (If you haven't priced your grain yet).

Also graincos don't usually offer ways to stay in the market after the grain is gone. They're after the handlings

[errolanderson]

Here's the flip side of the coin . . . .

Store cash canola and purchase put options as price protection.
Advantage of this is; the grower can wait on basis premiums potentially offered later in the crop year.

March canola: $570 put @ $15/MT . . . . $560 put @ $11/MT . . . . $550 put @ $8.50/MT.

May canola: $570 put @ $18/MT . . . . $560 put @ $14/MT . . . . $550 put @ $10/MT

July canola: $570 put @ $24/MT . . . . $560 put @ $19/MT . . . . $550 put @ $15/MT

[errolanderson]

Here's the flip side of the coin . . . .

Store cash canola and purchase put options as price protection.
Advantage of this is; the grower can wait on basis premiums potentially offered later in the crop year.

March canola: $570 put @ $15/MT . . . . $560 put @ $11/MT . . . . $550 put @ $8.50/MT.

May canola: $570 put @ $18/MT . . . . $560 put @ $14/MT . . . . $550 put @ $10/MT

July canola: $570 put @ $24/MT . . . . $560 put @ $19/MT . . . . $550 put @ $15/MT

Note: Trading through a commodity brokerage account allows the grower full control of their marketing. There is no tie to handlings and cash grain contracts. There is no production and/or delivery obligation.

Also, it is cheaper to go direct and use your own commodity trading account.

[canolacrazy]

$13.00 is available. it's a no-brainer. if no need for cash right now, sell 50% now and let the other half ride till spring. if there's bills to pay, go to 75% sold.