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Corn Hovers Near Contract Lows

06/13/2014 @ 2:37pm

December corn futures have recently dropped from over $5.00 per bushel to under $4.50. If you have purchased $5.00 puts, you are now in no man's land. What does that mean? No matter what action you take, you can kick yourself for taking the wrong turn. In other words, you can view it as a lose-lose situation. Now it's just a matter of minimizing which "lose" you want.

Let's run through the different scenarios. The first scenario is that you take the profit, close out your $5.00 put, and prices head lower. You've moved out of the market too soon. You kick yourself for making the wrong move. In the second scenario, you don't take your profit, and prices rally back over $5.00 at expiration. You lose your gain plus what you paid for your put. There is another kick. You could argue your cash corn gained value, yet you missed an opportunity to take money off the table. The third scenario is rolling your $5.00 put down to a $4.50 put. Should prices rally, you've done the right thing by preserving capital, but you still kick yourself for moving into a lower put rather than exiting. Or, if prices drop after the roll, you should not have rolled. Your new put will not gain value as fast as the $5.00 put you owned. So there you go--another kick!

We’ve tried to add some levity to this Perspective. It's easy to beat yourself up regardless of which marketing decision you make. However, in all seriousness, it's a matter of making good decisions to use the best strategy that works for you. Marketing will likely never be considered "easy." It is challenging and takes real dedication and hard work. Utilize the best strategy that works for you.

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If you have questions or comments, or would like help implementing strategy for the year ahead, please contact Bryan Doherty at 1-800-TOP-FARM ext. 129.

 

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

 

Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider

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