There is a prospective plantings report due out tomorrow. The warm Midwest weather allowed for much earlier than expected plantings for corn. It is expected that the acreage production numbers will be much higher than past years for the corn market. $6.25 is also a strong price historically for corn. In addition, during 6 of the past 7 March reports the market has made a limit move after the report. Corn has found it easy to break and tough to rally since the warm spate began. May options have about 3 ½ weeks until expiration and I want to purchase put options here. The May 5.75 puts (expire April 20) can be had for about 3 ¼ cents or $162.50. Futures are currently near 6.27 and the daily limit for corn is 45 cents. If the is not as bearish as thought, the puts can probably be sold for less than a penny below the buy price.
The Trade: Buy the May Corn 575 put for 3 ¼ cents. Objective: I will advise on a liquidation order this Friday or early next week.
I need to make a small correction. The prospective plantings report will be released at 7;30 am central time on Friday March 30, not tomorrow as I wrote below.
The early orders for the 575 puts were filled at 3 ¼ but as corn has dropped the 575. Put is now at 4 1/8 and many of you who called have been able to purchase the May 570 put for the 3 ¼ cents premium. If the report is bearish as expected, the 5 cent Difference of strike price should not affect the profit potential by much.