March 15, 2019
The Bull Market in Row Crops Started this week?
I keep banging away with my recommendation to buy these markets as I KNOW how important it is be there BEFORE the big action starts…To not be sitting there two to three weeks from now thinking, “I knew I should have gotten SOME.” Or, “Maybe I can buy some when (IF!!) we get a pullback.” Hell. I don’t know if I’m right here. I don’t know if this stuff IS actually starting to do what I think it’s going to do…But this game is all about percentages, and the recognized potential of what CAN happen…and TIMING…And at this time of year, with none of these crops even in the ground, and EVERYBODY bearish and/or preaching “Sell if they rally!”, I JUST DON’T THINK YOU GET ODDS AND LEVERAGE THAT ARE ANY BETTER THAN THIS…All four of these markets can RIP IT ON THE UPSIDE, and especially at this time of year…AND I PERSONALLY AM TRYING TO BE ON THEM AS BIG AS I CAN RIGHT NOW.
It’s been a while, but I never forget what one of my wall reminders tells me: ONE GOOD TRADE IS A IT TAKES…I mean, really, sometimes it is just amazing what can happen when you get on a market…or markets…that are truly on the move.
It is NOT just coincidental that all four of these markets had a strong week and all four closed dead on their highs for the week…
Part of this business is looking for clues…And with speculative interests holding near RECORD short positions, I think this week’s across the board strength…with basically ZERO news to explain it…is highly significant. Pretty much the start of every bull market I’ve ever seen was accompanied by overwhelmingly bearish opinion among analysts…and all the specs being exactly what they are now…which is short up to the gills.
I reiterate: BUY ALL FOUR OF THE MARKETS NOW…USING OPTIONS OR FUTURES…I don’t care what approach you take…I say JUST BUY THEM NOW.
Same as in Corn, do not make the mistake of thinking that the last year’s action in all of these is their norm…All of these markets can, and do, move MUCH bigger than what they’ve recently been doing.
My Recommendation: Buy All Four Markets in 1 contract “units”
July Cotton closed 76.60 1 July 78.00 call at 2.60 = $1300 + 61 = $1361
July Soybeans closed 9.23 1 July 940 call at 20 - $1000 + 61 = $1061
July Wheat closed 468 1 July 480 call at 21 = $1050 + 61 = $1111
July Corn closed 382 1 July 380 call at 16 = $800 + 61 = $861
TOTAL COST FOR ALL FOUR MARKETS = $4394
So…Be aware that $2-$4 moves in Grains, and 20-30 cent moves in Cotton, ARE normal swings for each of these markets…Then DO THE MATH…which DOES mean that If just ONE of these commodities makes a moderate move, you are easily looking at the potential to get back 100% of what you have invested…And just to be sure that you do understand the risks (my obligation), if all four markets go straight sideways…or lower…until expiration, you could also lose 100% of what you have invested.
That being said, and this may be a stupid statement, and one more time, I might be dead wrong…but I think it is essentially impossible that not even a single one of these markets will have a MAJOR rally in the coming months…which, as stated above, is all we really need (1 winner) to probably be in a position to, at worst case, break even if the other three just die…On the flip side, I also know that the markets all tend to move in some degree of unison…and I CAN THEREFORE EASILY ENVISION THEM ALL GOING SOMEWHERE, AND QUITE DYNAMICALLY, ON THE UPSIDE.
I THINK THIS IS A BIG, BIG TRADE.
Don’t just watch it. Don’t just “wait and see.” Call me this weekend or Monday and let’s DO something with it.
Old Hand Bill
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Cotton, Soybeans, Wheat, Corn