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Scott Shellady: Options 101

@ScottTheCowGuy gives an options class in this week's Big Picture from the CME Group Floor.

Fri, 25 Jul 2014|

I -- got facilities with the -- investments here in the CME Group Floor in Chicago for six of forming. Magazine and -- dot com. I do on a Thursday this the sweet little bit different. -- a little confidence schedule yesterday so. I guess we get one more to have data to talk about but it really hasn't changed the big picture at all lately sorrow for the moment today. Good export sales -- least surprising accuracy goes and the beam and -- a Rios had both of those off to a better start this morning. But a lot of those gains were given back his corn finished down about 11 quarter on the they -- Down a couple but we did have some games we held onto over the -- market up about a quarter. What does that really mean all. It just means that the weather's those good enough that a -- is any really big bullish news so if -- -- and I guess that says -- Think of Angelos rallies early and often because outside they. -- sold off when we start to really take a look at but a big picture point of view I was actually have new crop and -- not supposed to say. Cool for the next two weeks we did have some concerns about some dry weather drying cool but dry and -- some decent -- or so levels. Really shouldn't be too stressful on the crop. We'll wait and see I guess as we move into -- August timeframe. The beams of the be the ones will be coming under fire. Corn looks very very good right now that's what the numbers are showing us weekly basis from the government. So I guess it's starting them slowly surely -- movement of the story and I think that's why. We saw a little bit of a bid to the -- today. The same time China -- -- C'mon wanna look at one of the suit that. That the Jesus they get good it's a mission from energy MO corn that was also an idea of so whether. Some Chinese moments -- kind of pushed things lower after we had initial. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- For both corn and -- well let's just -- -- percentage there. The trade -- -- the trade of the day that I'm seeing a lot of his doubts that put production are still sees seems to CB some buyers. 151000. This summer three dollar puts purchased for between apps sent I mean apps and so. Returning half and wanna have pennies. Paper or institutional investors what one 50000. Of those three dollar December -- Of everything we're gonna go down and I think that is by those for an insurance -- what they're also doing on top of that is. They're selling volatility -- -- think the move was over. So I've seen a lot of this go through as a way. Selling at 350 points in the summer. And also selling a four dollar calls in December so let's have the December. 354 dollar we call -- a -- 350 points four dollar calls we've seen a lot of selling. Going short. By institutional investors and they're able to sell that. For price of twenty cents now you probably don't have the options and no options very well I'll give you a quick lesson. If we're selling a three dollar and fifty cent put and we're selling a four dollar call but we received twenty cents. We have a breakeven between now on when around -- Thanksgiving when those December options off. Of between 330 to the downside as we start losing money. And for whites of the upside. So -- that morning -- I've taken its pricing credit them because targets for selling both of those together added together call to strangle. Between now on Thanksgiving if that. The market goes off anywhere between 354 on which. Who knows that's a gamble but honestly received -- south fort. That the downside is that the breakeven czar at the institutional investor really has to worry once we get through 330 on the downside at -- swimming upside. That's been pretty much the two big trades of the two big ideas. And sometimes there's little variations of the -- but there are a lot of trades of Tommy that the institutional investor. The professional trader feels a lot of these moves are over now quorum. The best of the good news is out there and now maybe we can only really have skiers. Or at least we're gonna stop the slide source selling a lot of options which are at the monitor just around the money to take him credit and let those options CK. And for insurance purposes we might wanna be buying some doubts that -- that's what the papers doing institutional investors sold 151000. Downside puts three dollar -- war between a half cent -- maps that were bought by professional traders and at the same time also selling. A lot of volatility are selling a lot of it at the money options to taken -- credit because they don't believe. We're going too far premier and that the move is over. So that's the options class for today I kept the kind of straightforward but that's really what we're seeing again there are different variations of those ideas. But the are all really trying to express the same point of view. We still be worried about the downside. But all it as a big likelihood briefing that the move was over. Mets betrayed him to assure that is what they institutional professional trader and looks as though is thinking and more options so that's it for the options vest today. Let's keep an -- and those things. Going forward as we watch those trees down to him now and Thanksgiving would be just to retract that. But it's that really is what we've been seeing. Pretty much on the basis for about the last seven to ten trading days. So that's options vest over a Lago will look back -- sort of economics Wednesday -- and -- if anything's changed in that environment. But that from now. I'm -- Sony for. DJ am investments and successful for farming today using him and going back -- give me a little options him what we're seeing a lot of options place. That we'll see how those work out for those institutional investors next week we get together again. Kelly Garcia. -- Blue.

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