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Thursday, December 23, 2010
Vinny Vegas - Simply sells his cash grain a day before the January USDA crop report; he then re-owns with 3 leg trade that includes sellling put options slightly below the market and using that to purchase bull call spreads. He will try to do 1/2 his bushels with July options and the other 1/2 he will sell July puts to buy nearby serial options Jan options that expire around 10 days after the USDA report. The last couple years his strategies didn't work at all; but in 2008 he managed to get well over $100 a bushel for his spring wheat. (He sold at the money July puts to buy March call options and did so at a 5-1 ratio; so when spring wheat got to 20-25; he was getting 5 times that)
This year he has 100,000 bushels of spring wheat, 100,000 bushels of corn, and 100,000 bushels of soybeans. On January 10-11th he will place the above strategies; on all of his old crop grain.
Neutral Nick has another unique style. He tries to sell all of his grain on July 1st; but in the meantime he uses delta neutral hedging ideas to try and collect premium. With the recent run up in prices he has the following plan for his wheat; 1st off he has HRW wheat; but he likes to use CBOT options because of liquidity. So he places GTC orders to buy 10 KWN and buy 10 WN at 50 cents and then again at 75 cents; if filled it keeps him hedged in correct contract.
He then decides that joy to the season and he places hedges that create a position that leaves him with a net delta position of short about 100,000 contracts of each corn, wheat, and beans. Thus leaving him net sold out. His style is over aggresive but his plan is to simple adjust as needed to keep his net delta short aprox 100,000 of each grain thus basically leaving him sold out.
The follow ups will be to keep position near a net of zero; i.e. if we rally he will sell more puts......if we break he will sell more calls.
In the wheat example if we stay between 7.00 and 8.50 he adds over 2.40 a bushel to his price; nearly a quarter of a million to his bottom line.
Below is a copy of the table used for the three commodities; look for him to add trades ever week or so to keep position neautral; keep in mind that his exposure or risk is huge if he doesn't follow things up as he runs risk of having way too much sold or owning more then he orginally did. This is a strategy that will and could take more then just a little margin or line of credit.
| Long | # of | Option | Futures | Expiration | My Trade | Futures Price | Theoretical Opt. Value | Notional | Position Equivalent | |||||||
| or Short | Contracts | Symbol | Reference | Date | Date | Price | Last | Over-Ride | Per Unit | Total | Position (bu) | Delta | Delta (bu) | Gamma (bu) | Theta / Day | Vega |
| SHORT | 60.00 | WN1000C | WN1 | 24-Jun-2011 | 23-Dec | 49.250 | 823.000 | 49.250 | $147,749.00 | (300,000) | (0.328) | (98,430) | (400) | $779 | ($6,286) | |
| SHORT | 25.00 | WN700P | WN1 | 24-Jun-2011 | 23-Dec | 37.875 | 823.000 | 37.875 | $47,343.00 | 125,000 | 0.235 | 29,485 | (163) | $242 | ($2,237) | |
| SHORT | 10.00 | WN900C | WN1 | 24-Jun-2011 | 23-Dec | 73.500 | 823.000 | 73.500 | $36,749.00 | (50,000) | (0.445) | (22,269) | (75) | $137 | ($1,139) | |
| SHORT | 2.00 | WN850C | WN1 | 24-Jun-2011 | 23-Dec | 89.125 | 823.000 | 89.125 | $8,912.00 | (10,000) | (0.513) | (5,139) | (15) | $27 | ($229) | |
| 97.00 | $240,756.00 | (235,000) | (0.199) | (96,352) | (653) | $1,186 | ($9,891) | |||||||||
| SHORT | 40.00 | SN1500C | SN1 | 24-Jun-2011 | 23-Dec | 82.500 | 1369.250 | 82.500 | $164,999.00 | (200,000) | (0.395) | (79,125) | (229) | $686 | ($7,408) | |
| SHORT | 50.00 | SN1200P | SN1 | 24-Jun-2011 | 23-Dec | 42.500 | 1369.250 | 42.500 | $106,249.00 | 250,000 | 0.228 | 57,095 | (262) | $582 | ($7,331) | |
| LONG | 20.00 | SG1300P | SH1 | 21-Jan-2011 | 23-Dec | 23.500 | 1360.000 | 23.500 | $(23,499.00) | (100,000) | (0.291) | (29,156) | 280 | ($725) | $1,319 | |
| SHORT | 30.00 | SN1600C | SN1 | 24-Jun-2011 | 23-Dec | 62.000 | 1369.250 | 62.000 | $92,999.00 | (150,000) | (0.311) | (46,722) | (150) | $498 | ($5,125) | |
| 140.00 | $340,749.00 | (200,000) | (0.139) | (97,908) | (361) | $1,040 | ($18,546) | |||||||||
| SHORT | 55.00 | CN800C | CN1 | 24-Jun-2011 | 23-Dec | 30.750 | 625.750 | 30.750 | $84,562.00 | (275,000) | (0.279) | (76,867) | (442) | $516 | ($4,091) | |
| SHORT | 30.00 | CN550P | CN1 | 24-Jun-2011 | 23-Dec | 37.250 | 625.750 | 37.250 | $55,874.00 | 150,000 | 0.276 | 41,414 | (268) | $248 | ($2,210) | |
| LONG | 20.00 | CG630C | CH1 | 21-Jan-2011 | 23-Dec | 24.500 | 614.000 | 24.500 | $(24,499.00) | 100,000 | 0.445 | 44,510 | 499 | ($540) | $683 | |
| SHORT | 35.00 | CH700C | CH1 | 18-Feb-2011 | 23-Dec | 16.500 | 614.000 | 16.500 | $28,874.00 | (175,000) | (0.264) | (46,280) | (510) | $561 | ($1,394) | |
| LONG | 30.00 | CG600P | CH1 | 21-Jan-2011 | 23-Dec | 23.375 | 614.000 | 23.375 | $(35,062.00) | (150,000) | (0.400) | (60,149) | 761 | ($761) | $1,002 | |
| 170.00 | $109,749.00 | (350,000) | (0.114) | (97,372) | 39 | $24 | ($6,010) | |||||||||
Keep checking back as we will update regularly!
To get a blank marketing plan temple check out our page on Marketing Guidelines and Templates
Easy Bill Marketing Plan
| Easy Bill | |||||||||||
| WW | 100,000.00 | bushels | $ 5.10 | ||||||||
| SW | 100,000.00 | bushels | $ 5.70 | ||||||||
| Corn | 100,000.00 | bushels | $ 4.00 | ||||||||
| Bill likes to keep things fairly simple | |||||||||||
| Cash Flow is not an issue | |||||||||||
| Have 100k of ww corn and sw to sell and we will use the futures price to simplify things. | |||||||||||
| If target price is not hit by deadline then grain will be sold at that days price if it is above the break even price listed | |||||||||||
| WW | ||
| 1 | I will sell 15k at 8.20 by Dec 31st using TBD | |
| 2 | I will sell 15k at 8.40 by Jan 11th using TBD | |
| 3 | I will sell 15k at 8.60 by Feb 8th using TBD | |
| 4 | I will sell 15k at 8.80 by March 1st using TBD | |
| 5 | I will sell 15k at 9.00 by March 28th using TBD | |
| 6 | I will sell 15k at 9.40 by April 15th using TBD | |
| 7 | I will sell 10k at 10.00 by May 9th using TBD | |
SW
| 1 | I will sell 15k at 8.50 by Dec 31st using TBD |
| 2 | I will sell 15k at 8.60 by Jan 11th using TBD |
| 3 | I will sell 15k at 8.70 by Feb 8th using TBD |
| 4 | I will sell 15k at 9.00 by March 1st using TBD |
| 5 | I will sell 15k at 9.30 by March 28th using TBD |
| 6 | I will sell 15k at 9.50 by April 15th using TBD |
| 7 | I will sell 10k at 10.00 by May 9th using TBD |
| Corn | |
| 1 | I will sell 15k at 5.80 by Dec 31st using TBD |
| 2 | I will sell 15k at 6.00 by Jan 11th using TBD |
| 3 | I will sell 15k at 6.10 by Feb 8th using TBD |
| 4 | I will sell 15k at 6.20 by March 1st using TBD |
| 5 | I will sell 10k at 6.40 by March 28th using TBD |
| 6 | I will sell 10k at 6.60 by April 15th using TBD |
| 7 | I will sell 10k at 6.80 by May 9th using TBD |
| 8 | I will sell 10k at 7.00 by May 9th using TBD |