NEW CROP HEDGE RECOMMENDATION

Disclaimer: there is risk of loss trading futures and options. Past performance does not necessarily indicate future results. This is our opinion and should be treated as such.

Nov soybeans are sitting at 4-year highs. If you are behind on new crop sales, we like considering getting caught up in sales or hedges.

If it makes sense for your operation, you can consider the following.

If local basis is attractive:

Consider making a new crop cash sale. Make sure to try and get a basis push because we are seeing good buying demand which means elevators are making sales and may provide an opportunity to negotiate a stronger basis.
If you’d like to keep some upside exposure after making a sale, consider buying a $12.50/$13.50 call spread and paying for it by selling the $11.70 put. The net cost of this is 0 to 2 cents, but selling the put does require margin. Selling the put allows you to re-own soybeans 50 cents lower in exchange for $1.00 of upside.

This chart shows your max upside and how the trade works.

If local basis is weak and you believe it will improve:

Sell the $12.80 call to buy the $12.00/$11.30 put spread.
This gives you 70 cents of downside protection in exchange for the potential of having to sell futures about 60 cents above today’s price if we keep rallying.

This chart shows your max upside and how the trade works.

These are just a few examples of strategies that may or may not be fit for your situation. If you would like to discuss strategies please give us a call or text.

Office: (806)484-1214