COT Analysis - Grains ZL & ZCZL & ZC are fundamentally setup for shorts if we get a confirmed daily bearish trend change.
I like ZL more than ZC, for reasons outlined in the video.
Have a good week.
ZCZ2013 trade ideas
Corn Reversal: Classical 5 bar trend confirmed!Corn CBOT:ZC1! is showing signs of a reversal, and it has confirmed the following:
The daily trend was activated at yesterday's close, with enough momentum to push above 450.
The weekly trend is also active, following a classic five-bar trend pattern, indicating a strong reversal signal.
Once it reclaims 433, it should quickly move toward the first target of 466.
If everything aligns as expected, it could aim for a break of the current trend. For now, it’s important to take it level by level.
Riding the Corn Swing TradeCBOT:ZC1! LONG trade signal triggered. Price has shaken off weak hands by taking liquidity off the lows. We have now a bullish hammer candle and we just made a higher high on lower timeframe.
DCA entry as close to $400’s
Stop tight at $399
Target mid $430’s
Corn Futures
Prices tested the upper Bollinger Band near 4400 in late September and early October, which acted as resistance.
The market has since pulled back from this level, signaling a rejection of higher prices at this point.
The price is now around 4156, and the 4100 level seems to be acting as a near-term support.
The widening of the Bollinger Bands in the past months suggests increased volatility, especially during the downtrend.
The market appears to be in a corrective phase after a sharp downtrend, with potential support around 4100 and resistance near 4400.
A break below 4100 could signal a continuation of the downtrend, while a breakout above 4400 might suggest further recovery toward higher levels.
Watch for narrowing Bollinger Bands, as this could signal a volatile move in the near future.
COT Analysis - GrainsA very quiet week for COT setups.
This week, Corn is still a setup market for shorts. This video goes into why I am looking to short Corn if I get one of my 3 entry triggers.
Have a great weekend.
15% to 35% Upside Ahead for Corn (Divergence Strategy)Corn recently has had the monthly bullish divergence confirmed with Septembers monthly close. This has major implications for corn, as I anticipate corn to now trade up at least 15% from current prices, up to a max move of approximately 35%. Monthly divergence triggers such as this are signals that the prudent trader must pay attention to. This does not mean I anticipate this market to go straight up from here. However, it does mean that, in my opinion, dips are for buying in the Corn market until we reach these upside targets.
Have a great week.
Options Blueprint Series [Advanced]: Reverse Time Iron Condors1. Introduction
In today’s advanced options trading discussion, we introduce a unique structure—"Reverse Time Iron Condors"—using Corn Futures Options (ZCH2025). This sophisticated strategy leverages options with different expiration dates, allowing traders to position themselves for a potential market move in the mid-term.
The Corn market has recently shown signs of slowing momentum, as indicated by technical indicators such as ADX (Average Directional Index) and RSI (Relative Strength Index) applied to ADX. Our analysis shows that RSI applied to ADX is oversold, and RSI is approaching a key crossover signal that could confirm an increase in volatility. Given this setup, the Reverse Diagonal Iron Condor (a.k.a. Reverse Time Iron Condor) structure aligns well with the market’s current conditions over two expiration cycles.
CME Product Specs (Corn Futures ZCH2025)
Contract Size: 5,000 bushels per contract.
Tick Size: 1/4 cent per bushel (0.0025), or $12.50 per tick.
Required Margin: USD $1,200 per contract at the time of producing this article.
2. Market Setup & Analysis
To understand why the Reverse Time Iron Condor is suitable for Corn Futures right now, let’s delve into the technical picture:
ADX Analysis: Corn Futures’ Daily ADX has been dropping, indicating weakening momentum. This signals a period of consolidation, where price volatility remains low.
RSI of ADX: By applying the RSI to the ADX values, we notice that ADX is now oversold, suggesting that momentum could soon pick up.
RSI Crossover: The RSI is nearing a crossover above its moving average, confirming that a new impulse in momentum would be in the process of potentially occur. This technical picture suggests the market could stay in a low-volatility phase for now but break out in the near future.
Based on this technical setup, the strategy we present is to capitalize on the short-term consolidation while preparing for a potential breakout, using the Reverse Diagonal Iron Condor structure.
3. Strategy Breakdown: Reverse Diagonal Iron Condor
The Reverse Diagonal Iron Condor is a unique options structure where you sell longer-term options and buy shorter-term options. This setup generates a negative theta position, meaning time decay works slightly against the trader. However, the strategy compensates for this through positive gamma, which accelerates the delta as the underlying market moves, especially during a breakout. This combination allows the position to profit from a sharp move in either direction, with relatively limited cost.
For this trade on Corn Futures (ZCH2025), the structure is as follows:
Sell 450 Call (21 Feb 2025), Buy 455 Call (27 Dec 2024): This creates a short diagonal call spread, where the February short call decays slowly due to the longer expiration, and the December long call acts as a short-term hedge against an early rise in prices.
Sell 410 Put (21 Feb 2025), Buy 405 Put (27 Dec 2024): Similarly, this forms a short diagonal put spread. The February short put is subject to less time decay, while the December long put protects against a sharp downward move before its expiration.
Key Mechanics:
Time Decay (Theta): Although the trade has negative theta, the impact of time decay is relatively small because the February options decay slowly due to their longer-term expiration.
Gamma and Delta: The positive gamma in this position means that if a breakout occurs before the December expiration, the delta will increase significantly, making the trade more sensitive to price changes. This could more than offset the negative theta, allowing the trade to capture large gains from a significant price move.
Objective:
The goal is for Corn prices to experience an impulsive move (either up or down) before the December 2024 expiration of the long legs, allowing the positive gamma to boost the position’s delta. If this breakout occurs, the potential profits from the price move will likely surpass the small losses due to time decay. The structure is ideal for markets in consolidation that may be on the verge of a volatility surge, as the falling ADX and oversold RSI suggest.
This strategy is particularly well-suited for Corn Futures (ZCH2025), given the current technical setup, where a near-term consolidation phase might be followed by an explosive move in either direction. The success of this trade relies on a timely breakout occurring before the December expiration, after which the position may need adjustment to manage risk.
4. Risk Profile at Initial Setup
The initial risk profile for this trade reminds us of an Iron Condor risk profile, with the best case being a range-bound corn market between 410 and 450.
Important Consideration: This risk profile does not reflect the final outcome because the trade spans two different options cycles. The December options will expire first, which means adjustments may be necessary after that expiration to maintain protection.
Note on Options Simulation Tool:
It's important to mention that the options simulation tool provided by TradingView is currently still in its beta stage. While it offers useful insights for analyzing and visualizing options strategies, traders should be aware that certain features may be limited, and results might not always reflect all real-world conditions. For a more comprehensive analysis, it is recommended to complement the simulation with other tools such as the Options Strategy Simulator available in the CME Group website.
5. Optional Trade Management After December Expiration
Once the December 2024 long options expire, you will face two possible scenarios. In both cases, managing the February 2025 short options is crucial:
o Scenario 1: Corn Prices Remain Range-Bound:
If Corn futures continue to trade within the 450-410 range, the December long options will expire worthless.
In this case, the strategy shifts to managing the February short options, which will benefit from time decay. Monitor the market closely and consider whether to buy new protection for the remaining February short options.
o Scenario 2: Corn Prices Break Out:
If Corn futures break above 450 or below 410 prior to the December expiration, the February short options could expose the position to significant risk if we allow them to expire.
One potential action is to purchase new long options within the range (for example, buy the 445 call and the 415 put using 21 February 2025 expiration). While many other actions could be valid, a common and probably the simplest approach could be to close all legs in time for a likely profit at this moment.
6. Risk Management
Effective risk management is essential in any options strategy, especially one as advanced as a Reverse Diagonal Iron Condor. Below are key points to ensure this trade stays within your risk tolerance:
o Position Sizing:
Given the complexity of this trade, ensure that the size of your position fits within your overall risk management plan. Avoid over-leveraging, as unexpected price movements can lead to significant losses once the December long options expire.
o Monitor Key Levels:
Keep an eye on the 450 strike (resistance) and 410 strike (support). If Corn breaks these levels early in the trade, consider closing the position or making adjustments.
o Volatility Management:
The success of this trade hinges on an increase in market momentum.
7. Conclusion
The Reverse Diagonal Iron Condor is an advanced options strategy where the long positions have a shorter expiration than the short positions, creating a negative theta position. Instead of benefiting from time decay as in a traditional Iron Condor, this strategy is designed to take advantage of expected volatility increases over time. By selling longer-term options and buying shorter-term options, traders are positioning themselves for a volatility breakout or significant price movement before the near-term options expire.
In this setup, time decay has a limited negative impact on the position, but the key advantage lies in the positive gamma. This means that if a breakout occurs, the position’s delta will accelerate, potentially outpacing the slight negative effect of theta. Traders should closely monitor the December expiration, as the success of the trade hinges on the anticipated large move happening before this date. This structure is particularly well-suited for Corn Futures (ZCH2025), given the falling ADX and RSI, which suggest a potential momentum shift. The strategy is designed to benefit from a significant price move with limited cost, assuming the breakout occurs within the timeframe of the December long options.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
Can Corn Conquer Climate Change?The global food system is under siege from the escalating climate crisis, and corn, a pivotal commodity, is facing a particularly formidable challenge. Rising temperatures, erratic rainfall patterns, and the increased prevalence of pests and diseases are all conspiring to undermine corn production. This article delves into the intricate relationship between corn and climate change, examining the potential consequences for food security, economic stability, and social well-being.
Beyond the immediate threats posed by climate change, the impacts on corn production can have far-reaching consequences. Reduced yields can lead to price volatility, making it difficult for low-income households to afford basic food staples. This can contribute to food insecurity and malnutrition, particularly in vulnerable populations. Moreover, corn production is a major source of income for many farmers, especially in developing countries. Climate change-induced crop failures can have devastating consequences for rural livelihoods and economic stability.
However, the challenges are not insurmountable. By adopting sustainable agricultural practices, investing in climate-resilient crop varieties, and fostering global cooperation, we can safeguard the future of corn and ensure a more sustainable and equitable food system for generations to come. Climate-smart agriculture, which includes practices like crop rotation, cover cropping, and precision agriculture, can improve soil health, reduce water use, and enhance resilience to climate change. Additionally, breeding for resilience can develop corn varieties that are more tolerant to heat, drought, and pests.
Furthermore, promoting crop diversification can help reduce the risk of crop failures and ensure food security even in the face of climate-related challenges. Governments can also play a crucial role in supporting farmers by providing financial assistance, access to climate information, and investments in agricultural research and development.
In conclusion, the future of corn is inextricably linked to our ability to adapt to a changing climate. By embracing sustainable practices, investing in innovation, and fostering global cooperation, we can ensure that corn continues to play a vital role in feeding the world. It's a call to action, a challenge to rethink our approach to agriculture, and a reminder that the future of food is in our hands.
Corn Pop?Corn
Technicals (December)
It's the first trading day of a new month and so far, it's been rather mute, but that could change when we get more participation at the 8:30 open. Last week, December corn futures were able to chew through and close above trendline resistance and the 20-day moving average, for the first time since July 25th. The move above here has not turned the tide to outright bullish, but it has certainly helped to neutralized some of the bearish momentum. These levels will now act as support to start the month, a failure to defend them puts the Bears right back in the driver's seat. On the resistance side, our pocket from last week remains intact from 401-403 3/4.
Short Term Bias and Technical Levels of Importance
Bias: Neutral/Bullish
Resistance: 401-403 3/4***, 409-413****
Pivot: 395-397 1/4
Support: 380-385***
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
there are no such a trend thingbefore i am a trend trader but i always lose my money because i keep seaching where trend is . but now i just realize the market doesnt move like a trend . trend only happen when it already finish . market movement with range . low buy high sell is the good strategy . wait corn move into cheap price we buy and sell it when it expensive .
CORN :SHORTTREND: Down trend
Making lower highs and lower lows
No divergence, at present near the trend line and presence of red candles
SL:378.29
EP:374.29
TP:367
Risk: reward: 1:1.7
Is Corn Building A Bottom?Corn
Technicals (December)
December corn futures continued to retreat in yesterday's trade, settling right in the middle of our pivot pocket from 399-403. Trendline resistance comes in at the upper end of that pivot pocket, above that is the 20-day moving average at 408. That acted as a brick wall in Tuesday's trade where we posted a high of 409. A move out above here on a closing basis could spark some optimism, but that seems like a tall order at this point. On the support side, 395-396 is the pocket the Bulls want to defend. A break and close below there takes us to new lows and keeps the door open for a test of 380-385.
Short Term Bias and Technical Levels of Importance
Bias: Neutral/Bullish (cautiously optimistic)
Resistance: 408-409***, 412 3/4-413**, 421 3/4-423 3/4****
Pivot: 399-403**
Support: 395-396***, 380-385**
Weekly Export Sales Estimates (released at 7:30am CT)
Old Crop: 100,000 to 400,000 MT. Last week, old crop sales were reported at 167,864 MT, a marketing-year low
New Crop: 475,000 MT to 1.0 MMT. Last week's report came in at 710,900 MT.
Average Estimates for August 12th USDA Report
Production: 15.105 billion bushels
Yield: 182.1 bushels per acre
Harvested Acres: 82.974 million
23/24 Ending Stocks: 1.886 billion bushels
24/25 Ending Stocks: 2.106 billion bushels
Below: Daily Chart of December Corn Futures, depicting trendline resistance from the June highs as well as the 20-day moving average (in purple).
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Corn Futures Fail at Technical Resistance Corn
Technicals (December)
December corn futures looked like they were on the verge of breakout move above resistance in the middle of last week, but those hopes were crushed (for now) with a big down day on Friday. The weakness we saw in Friday's trade has spilled over into a softer trade to start the week, taking prices right back to where we were last Monday. Support remains intact from 399-403, a break and close below there would put prices back in in uncharted territory. The Bull camp wants to see a close back above 413-416 1/2 to neutralize Friday's technical damage.
Friday's Commitment of Traders report showed funds were net buyers of about 12k contracts through July 23rd, the bulk of which was short covering. That trims their net short position to 318,549 futures and options contracts, which is still one of the biggest on record. Broken down that is 158,606 longs VS 477,155 shorts.
Bias: Neutral
Resistance: 423-426**, 430-434****
Pivot: 413-416 1/2
Support: 399-403**
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
ZCU2024 LongThe 4-hour chart of Corn Futures shows a potential bottoming pattern with a recent reversal signal. The price has formed a higher low and is currently testing a resistance level. The Linear Regression Oscillator is in positive territory, suggesting bullish momentum. However, the overall trend is still bearish, which adds risk to the setup. The entry is placed above the current price to confirm the breakout. The stop is set below the recent low, while the profit target is near the previous resistance level. The risk-reward ratio is favorable at 1:2.28. The score of 6 reflects the potential reversal signal and positive oscillator reading, balanced against the broader downtrend and multiple invalidation levels above.
{
"direction": "Long",
"symbol": "ZCU2024",
"interval": "4h",
"entry": 399,
"stop": 392,
"profit": 415,
"risk": 350,
"reward": 800,
"quantity": 1,
"score": 6
}
Is There Any Hope of a Low Forming in Corn Futures? Technicals (December)
Corn futures failed to find any meaningful relief in yesterday's trade which keeps the Bears in control of the technical landscape. $4.00 is psychological support, a close below that could spark capitulation from longs. On the flipside, the Bulls need to see prices back above 412-412 3/4 on a closing basis to at least revive hopes of a relief rally towards some of the recent breakdown points. Our short-term bias is sitting at Neutral/Bullish, aka cautiously optimistic. If you're looking to play for a counter trend trade, volatility is down over the last two weeks which may make options more appealing, which could also provide a limited risk way to gain exposure.
Bias: Neutral/Bullish
Resistance: 420-422**, 430-434****
Pivot: 412-412 3/4
Support: 398-400**
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Butterfly harmonic pattern counts completeTarget hit last week and a nice rally could take place as we bounced off the 1,272 nicely
Cornycheck out some of my ideas. also I don't take every trade idea that you see here
these are assumptions before price action completes and confirms. The point of my ideas is try to predict price action everyone knows that's next to impossible but I'm having fun.
I am not a professional trader nor am I technical . all ideas are based on what I understand price to be. when I see certain confluences that fits my trading strategy I then look for my opportunity to enter trades.
to many egos here. we are all independent traders navigating the market. happy trading
Corn Has Begun Wave C of 5
Corn appears to have formed an expanded flat for wave B of 5 and has begun wave C of 5. Prices should continue to rise until we can count five waves up in wave C.
Corn Finishing Flat Formation
Corn appears to be near the end of wave C of a flat. There is potential for greater decline before the next wave up, but all price targets have been met for a running flat so prices could reverse at any moment.
post market analysis for xau & jpyHello i gave a breakdown oif the trending states of usdjpy and xauusd and what to expect from the upcoming week. Give a like and comment if you agree or found this video helpful!
Momentum Trading In Agricultural CommoditiesMomentum trading, a strategy as old as the markets themselves, has found fertile ground in the sprawling fields of agricultural commodities.
As the seasons change, so do the prices of wheat, corn, soybeans, and other staples, tracing patterns as predictable as the migration of birds or the spring blossom.
This paper delves into these seasonal trends, uncovering how they can serve as reliable signals for astute investors looking to harness the power of momentum trading.
SEASONAL TRENDS IN AGRICULTURAL COMMODITIES
Mint Finance has previously highlighted some of these seasonal trends in Corn and Soybean in detail previously
In short, seasonal cycles in crop performance are linked to crop harvest cycles. Pre-harvest, inventory drawdowns tend to drive price higher while post-harvest, a glut of inventory tends to drive prices lower.
Corn
Corn prices start declining in June following the harvest in China (second largest corn producer) and Brazil (third largest corn producer). Prices reach their lowest in October, coinciding with the harvest in the US.
Over the past five years, corn prices have increased in the first half of the year before declining sharply in late June. In 2024, indexed price performance shows prices sharply lagging the seasonal trend as we approach the date on which prices generally declined the last five years.
Wheat
Wheat seasonality is less pronounced than other agri-commodities due to its relatively global distribution. Still, wheat prices generally rise during the first part of the year before declining in late June as all the major producers - China, Indian, EU, Russia, and US harvest crops during this period.
This year, wheat prices started the year off on a bearish note. After bottoming in early-March, prices started to rise sharply peaking in late-May. Mint Finance covered some of the factors behind this rally in a previous paper (Extreme Weather Sends Wheat Prices Surging). Prices have started to normalize in June, a few weeks before the seasonal price decline generally begins.
Soybean
Soybean prices generally rise during the first part of the year. In late-June, as the Brazil harvest reaches its peak, prices decline sharply. Prices remain subdued until September when the US crop is harvested.
This year, prices have sharply lagged their seasonal performance. Despite the rally in early-May driven by flooding in Brazil, prices remain lower than their level at the start of 2024. Moreover, the rally following the flood-driven rally has retraced a few weeks before the seasonal price decline generally takes place.
MOMENTUM TRADING IN AGRICULUTAL COMMODITIES
Investors can execute momentum trading strategies by leveraging these seasonal trends. In this context, momentum trading strategy refers to a relatively simple trading strategy where investors either buy or sell a futures contract at the start of the month based on the seasonal price performance during that month.
For instance, if seasonal trends show that June generally results in a price decline, the strategy would consist of going short on the commodity at the start of June and closing the position at the end of the month.
Although, at face value, this strategy may seem overly simplistic, its return and accuracy are surprisingly high.
The simulations are based on a position in the front-month futures, consisting of one contract of the agricultural commodity, opened at the beginning of the month and closed at the end.
Corn
For Corn, running the momentum trading strategy would have yielded average annual returns of USD 8,500 per year over the past five years (2019-2023). Crucially, performance of this strategy in 2024 is sharply lower as it would yield total PnL of just USD 63 this year.
Wheat
Similarly, for wheat, this strategy returned an average PnL of 4,650 per year during 2019-2023. So far in 2024, this strategy would have yielded USD 6,600 in wheat futures in 2024.
Soybean
In Soybean futures, momentum trading would have been the most successful over the past five years. This strategy would have yielded an average of USD 13,600 per year between 2019 and 2023. However, in 2024, this strategy would not have been successful as it would have resulted in a loss of USD 8,700 so far.
SUMMARY AND 2024 PERFORMANCE
It is clear that although this strategy is successful on a long timeframe, it is not necessarily profitable each month. For instance, the Soybean momentum trading strategy would have resulted in a loss in 2024 while Corn momentum trading strategy would have resulted in flat returns.
The reason behind this divergence from seasonal trend is clear when comparing the seasonal price performance charts at the start of the paper. Fundamental factors can result in broad-based trends throughout the year which can skew returns. For instance, as Soybean prices have been declining for most of 2024, a long position would have resulted in a loss regardless of seasonal trends.
As such, it is crucial to supplement this strategy using fundamental inputs on what the long-term price trend for the crop is. For a crop which is in a down-cycle, a long position would not make sense and vice versa.
In the near-term, all three crop’s prices tend to decline during July based on seasonal trends. However, the outlook for corn is most bearish. The latest WASDE report , suggested that USDA expects global corn production in marketing year 2024-2025 to reach 1,220.5 million metric tons compared to a forecast of 1,219.93 million MT last month. The increase in production comes from forecast for higher output from Ukraine and Zambia more than offsetting the decline in Russia.
Moreover, USDA forecasts a season average price of USD 4.4 per bushel which is lower than the current futures price of USD 4.57. Asset managers are also shifting their view on corn prices bearish once again as COT report showed asset managers increasing net short positioning last week.
Both fundamental and seasonal factors support a price decline in corn over the next month. However, seasonal trends are not exact. Particularly in 2024, seasonal trends have underperformed their usual returns from the last five years.
Investors can opt to use options instead of futures to express the same view of weakening prices. Options provide fixed downside risk and require only an upfront premium, avoiding the need to manage margins as futures prices fluctuate.
A long put position in CME corn options expiring on August 23 (ZCU24) can be used to gain downside exposure.
CME Corn puts are relatively cheaper compared to calls. Moreover, options IV (measured by the CVOL index) is lower compared to the peaks seen during the same time last year. An options position would benefit from both falling prices and rising IV.
Source: CVOL
A long put options position on corn futures presents fixed downside of USD 464 (USc 9.29 x 5000/100) and unlimited upside. A strike price of USc 430/bushel represents delta of -0.29. This position would break-even at USc 420/bushel.
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
Corn Has Begun Wave 5 of a Leading Diagonal
It appears that corn has officially begun wave 5 of a leading diagonal. A fifth in a diagonal should generally take the form of a zigzag. Prechter, however, has noted that fifth waves in leading diagonals often appear to be impulses, so we might be able to count five waves up instead of three.
