Wednesday, January 12, 2011

Neutral Nick Marketing Plan follow up Crop Report Jan 2011

On a day that the USDA gave US carryout numbers tighter for corn then for wheat we seen our marketing character neutral nick add on or square his position.

As you will remember Mr Neutral Nick try's to keep his net delta equivalent position at 100,000 bushels short; then when July options expire he makes the cash sale.

So to keep him square he was forced to add some sort of sale strategy for corn.  The reason for this is long Feb corn calls that have a Vega that will move his Delta position sharply on rallies as the options near expiration.  He decided to sell 33 contracts of the Feb 6.60 corn calls for about 6 cents a piece; this helps turn some of his other calls into ratio type plays as well as bull call spreads.

After placing this trade I have him figured at Delta equivalent of short 100,032 bushels of corn; about where he wants to be.  With some options nearing experation he will have to follow up very closely and watch out for trading traps.  Also he has some puts that will quickly errod to nothing hedged if the market doesn't drop; so he will need to follow that up.

On beans he sold 5 of the 13.60 puts and 15 of the 13.00 puts; why as today's strong up move leaves him vulnerable to have too much sold unless he finds some sort of bullish or play that acts like a long to offset the too short position.

For wheat he sold 2 of the 9.00 July 2011 CBOT Wheat calls.

Overall he has yet to book any gains or losses on his trades; but he is showing about a $8,000 gain on corn,  $30,000 loss on beans, and a $27,000 gain on wheat.  Considering his cash levels (if he sold) would be the highest possible on 2/3 of the grains. 

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