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Commentary
The market bounced back sharply from early weakness and finished strong, especially in Kansas City as Plains rains are being pushed a little further out in time and a little further east. Dryness relief will now be limited over the next 10 days and temperatures will be very warm in the Plains, besides a brief cold spell this weekend. Highs in the 80s and 90s and a few 100 readings are possible in the southwest Plains. Dry and windy conditions are expected and not what the HRW crop needs. There are some precipitation chances in the forecast 10 days out and beyond, but confidence is fading. Other wheat news is very limited today and prices were supported by the strength in corn and beans. Until the Iran conflict completely ends, geopolitical risk will remain supportive. However, weather in the Plains is becoming a more important bullish factor. Outside reversals seen today led by July KC wheat. This contract continues to close within the pennant formation, close above $6.50 would start a breakout to the upside, close below $6.17 would be a failure in my opinion. Trade idea below. We aren’t staying at present levels in my opinion.
Trade Ideas
Futures-N/A
Options. -Buy the June KC Wheat 550 puts for 4 cents. Sell the June KC Wheat 7.00/6.50 put spreads for 40 cents. Collect 36 cents upon entry
Risk/Reward
Futures-N/A
Options-The maximum risk on the option package is 14 cents plus trade costs and fees. I see the July KC wheat either trading to 7.00 or heading back to where this latest rally began at 5.50. This is just one of many strategies on how to play wheat here.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.
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