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| You can choose any combination of strike prices to set your fence. For example, buy a $5 put and sell a $7 call. The problem right now is finding enough liquidity in the prices you select to get a good fill. The $5 put settled at $.609 with 1579 open contracts. The $7 call settled at $.262 with 6146 open contracts. The $6.50 call settled at $.334 and has 5157 open contracts. Strike prices between $6.50 and $7.00 have few or no open contracts. The volume on puts above $5 is very low or not traded yet.
Keep in mind that if you sell a call to lower your net cost, you have the risk of being short on the call strike price. I chose the $6 and $8 strike prices in the example thinking there may be an acreage battle latter in the fall or winter. The $8 call would require new all time high prices to go through. If short crops get smaller, a smaller number in the Nov crop or the final in Jan might provide the spark to move Dec11 higher as it did in 2008. This is a different economy than in 2008 so we might not move a lot higher even with price friendly numbers. A planting delay next spring or a drought next summer is a horse of a different color.
If you have not traded futures/options, a good broker is a must. WILL radio in Champaign (am 580) has a number of analyists/brokers on throughout the week. There is pre-opening commentary at 8:50, opening commentary at 9:50, Sue Martin @ 12:55, and closing prices and commentary from 1:50 to 2:30. You can pick them up on the internet, and the comments throughout the day are achived to listen to later. | |
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Using Dec11 Corn Puts
