This is a sample entry from John Payne’s newsletter, This Week in Grain, published on February 05, 2013.
It’s WASDE week! I look back to the January WASDE and I’m amazed at how quickly market sentiment has changed in just one month. Thirty days ago, I was asked repeatedly by stressed out producers what they should do with their old crop beans supply. Those questions have since diminished and now I’m asked if they should be selling sixteen dollar beans when they see it. Because the WASDE has been a trend turning catalyst in soybeans 4 out of the past 5 reports, I’m going to throw caution to the wind and suggest making a sale here. But rather than use a stop, I’m going to use a weekly option. (Read more on weekly options here – https://www.danielstrading.com/tag/weekly-options/)
Sell 1 March Soybeans at 1495-0.
Buy 1 Weekly 1500 Soybean call (expiring Friday’s close) for 9 cents.
Total risk is 14 cents before fees. (5 cents to 1500 where the call goes into the money, and 9 cents for the call)
This will allow us to get short ahead of the WASDE report without having to worry about a stop out. If the market closes on Friday anywhere above the 1500 level, a long position will be assigned, thereby offsetting the short. If this happens, you’ll be flat when the market opens on Sunday.
I believe in market symmetry, and based off the chart below, I feel this is a pretty good place to stand one’s ground on the short-side.
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