As we begin the 2014 planting season, our attention turns to the September 2014 Corn Options. September Corn futures (CBOT:ZC.U14.E) have started out well, supported by a report last week that the crop is already slightly behind in planted acreage (6% vs. 9% estimated). Opening the new week, we see a cool and rainy forecast across the Midwest along with severe weather. We are currently seeing up to 5 inches of rainfall expected over half of the Midwest.
Due to the weather forecast, the planting pace is likely to slow down dramatically this weekend and next week. The 10-year average plating pace for Illinois by April 28th is a little under 40%, while Indiana and Iowa are both about 30%. Historically speaking, we are well behind as plantings could reach near 20% for Monday's update but stall at this figure for the week due to weather delays. The recent weather has added support to the Corn futures, and any further delays should make the price rally considerably.
Since the start of the new year we have been in a strong up-trend in the Corn market. To date, this trend-line has been tested on multiple occasions and continues to hold. Also, as Corn has made each additional leg up in the up-trend, the buying has been on increased volume giving the market an overall bullish sentiment.
If the start to the spring and near-term forecasts are any indication, I will continue to be bullish on Corn into the summer months. For this reason, I will look to utilize a longer-term seasonal strategy that would take advantage of a potential bullish move in this market, while allowing over 3 months for the strategy to work. I will be looking to purchase September call option strategies that would be profitable in the case of a move towards $5.50/bushel - $6.00/bushel. These strategies would work throughout the summer, expiring on August 22nd. Per strategy used, we would look to keep the maximum exposure in the market to $500, and the maximum profit potential to $2,500 at expiration. This would give us an optimum risk-reward ratio of 5 to 1.
I advise clients on trading futures and futures options markets on a day to day basis. If you have any questions regarding this chart or questions regarding trading futures and futures options, feel free to call me directly at 888-272-6926.
Thank you for your interest,
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