Today is September grain option expiration, last week we watched September corn close near the lower end of the weekly range. Since Monday, corn reversed course and headed back higher although still trading in the major range that I mentioned last week. Monday’s Crop Progress Report revealed further declines in the good to excellent category which now stand at 60% and this should help support the market. The market looks poised to close near the highs for the week. In last week’s article I wrote the following “The market may be getting ready for a possible bullish set up. Why do I say that? Look at the volume, open interest, and price (see Sept corn daily chart below). The price has fallen over the last week (although still trading in the “big picture” bullish range) volume has fallen and so has open interest. This generally signifies that the market is ready to strengthen and turn bullish as weak longs are pushed out of the market.” This came to fruition so far this week with corn gaining about 15-cents from last week’s close and I believe there is more to come next week.
In previous articles I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside. I still believe a close above or below those prices are crucial to establishing a new direction. There are several, what I consider, minor areas of support and resistance inside that range that can help with short term market direction if violated. Call me at 1-800-367-7290 for more in-depth discussion on these numbers.
I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility recently came down but is still relatively high compared to historical vol levels. You may want to incorporate some short options into your strategy in a calculated risk manner such as bull or bear option spreads. I have 25-years of grain market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth trading strategies. Also be sure to check out my past weekly grain market updates posted on our website.