12 June 2019 Wednesday newsletter

New Trades today: I sold a Crude Oil SEP19 70-strike CALLs today for 0.09 ($90 each).

Net initial margin required: $565.  Premium collected excluding comm = $90 for possible ROI of 90/565 = ~ 15.9%
Days until expiration: 64  Expiration Date: August 17, 2019.
Strategy:  short CALL and I plan to add a short PUT in the same SEP19 Class at a later date.
Comment: Crude Oil has high inventories and the market bias is for a weaker world economy and weakening demand.  Should the trend down continue, I will shop for a PUT to sell to form a short strangle.

Here’s the Chart:

Corn WASDE Crop Progress: As expected the USDA did reduce acreage in yesterday’s WASDE report.  The surprise in yesterdays report was in the yield.  Here part of the story from AgWeb News, click here for the entire article:

USDA acknowledged those struggles in its latest report released Tuesday. The agency pegged yield for the 2019 crop at 166 bushels per acre. Crop production is forecast to decline 1.4 billion bushels to 13.7 billion. For Korff, trimming the yield may be just a start as the extreme variability in fields mean a final average yield even on his farm will be hard to forecast.

Certainly, a bullish forecast for DEC19 Corn prices.  It seem almost certain that next month’s JULY WASDE report will reduce acres and possibly lower the yield yet again. So for we CALL sellers, this means I stay out the way until higher prices are established.  There is the potential for the STU to get down to around 6 to 7%, the levels that were back in 2012 when Corn prices exceeded 5.50 to 6.00 per bushel.  DEC19 is trading today at 451.50 at midday.

Here’s the chart:

Comments Continued: The JULY WASDE will be at noon on July 11, 2019.   The next Crop Progress report due out next Monday at 4PM Eastern time, will reveal more about the acreage planted; this will give a hint as to how much USDA may cut the corn acres in next month’s WASDE.  So it will be a while before the time to SELL CALLS is here.

Not much change to discuss with Crude Oil and Gold for now.  I am also waiting for the NOV19 soybean contract to run up and sell more CALL options there soon.  Patience is the game here, keep studying fundamentals and USDA reports to try to see where a price top could be.  Over the next week, Kansas State University will put up new chart with the revised USDA numbers.  The CME also provides some of these charts reflecting the new numbers at this link:  (this is on the Resource Link TAB also all the time) The link is here: https://www.cmegroup.com/trading/agricultural/corn-reports.html   You will see the revised STU for corn is now about 11.4% and it could go down to near 6% this year, depending on acres planted and yield.

Summary of my Positions 12 JUNE 2019:

 Short SEP19 Gold 1500 CALL for 0.70

DEC19 short strangle  30 PUT and 90 CALL for .30 ($300)    I got 0.20 ($200) for the DEC19 30 PUT, and sold the DEC19 90 CALL for 0.10 ($100)

Gold DEC19  Short Strangle: Selling the 1150 PUT and the 1700 CALL for 1.9 ($190).  Initial net margin: $604.  Expiration: November 25, 2019  (174 day until expiry.)  Potential ROI*: 31.4%  Prob. OTM: 98%.  I got 1.40 ($140) for the 1700C and .50 ($50) for the 1150P.

And the new trade today: I sold a Crude Oil SEP19 70-strike CALLs today for 0.09 ($90 each).

That is all today.  Thank you. – Don

Don A. Singletary


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