Corn- The Most Aggressive Grain Rallies Ever
The dual life of corn has had a deep impact on the United States. Once thought to be a major commodity cash crop, corn has slowly evolved into an alternative fuel and not everyone is happy about that. From farmers to consumers, anyone involved with corn is beginning to feel the impact that this shift in consumption has created. Once it was an inexpensive commodity that could be purchased for a few dollars. All that changed at the beginning of the twenty-first century. Corn took the lead in one of the most aggressive grain rallies ever, actually doubling in price with the expectation that it could go even higher.
Before
The sideways support makes the trade perfect for an option as a hard stop. If it rallies back up from the current price of $4.36 to $5.15, there is a profit potential of 79 cents or $3,950. A stop loss can be placed at whatever money management target you may have.
A synthetic call could also work, or a ratio spread could be used to advantage of this trade for almost free. Whatever the case, it is important to make sure that a trade like this is not overlooked. Markets that move sideways for any significant period of time will be explosive, regardless of the direction. It is best to have all the necessary bases, long and short, covered in order to come out on top.
After
The corn drop took only few days before it was firmly below the 50-day MA, giving it a bearish trend. Depending on how nimble you are, you may be out of your primary position with a profit. The most likely outcome, based on the speed of the move, is that any long positions would have been breakeven, at best. The short position would have had to make up all of the work, which in this case would not have been too bad since the corn market dropped to $3.78/bushel.
