After such a large rally, a producer may be asking, "How can I take advantage of these prices, but leave room for the market to move higher?" The answer is a vertical put spread.
With a vertical put spread, you limit downside losses but keep the upside open. The strategy consists of buying an at-the-money strike put and selling an out-of-the-money put. The maximum loss is the net premium paid, while the maximum gain is the difference between the strike prices.
Today, I was looking at buying a $10.60 put and selling the $10.20 put. This could be done for $0.14 1/2 (1060 was at $0.22 1/2 and the 1040 was at $0.08) or $725. The potential gain is $0.40 (the difference in the strikes from 1060 to 1020) or $2,000. The best part is the market can continue to rally to the benefit of your cash grain position.
Feel free to contact Blackmore Commodities at 844-684-9199 or customerservice@blackmoregroupLLC.com with questions. Visit our website for more information at www.blackmorecommodities.com
*The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Please read our full disclosures and privacy policies.*