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If you are long corn or soybeans and want to exit, but the markets are locked
limit down, you might want to look at using the in the money Sep options
which expire in a week to get neutral or spread the market.
For example, if you are long the November soybeans and want to sell, buy the
Sep soybean 475 put. It is trading near 31 1/2 cents, and the Sep 475 call
is trading near 1 1/2 as I write this. That means Sep beans are trading at
about 445-. You are essentially selling the Sep beans at 445- for the cost
of buying the time value of the 475 call.
However, the August beans are trading still trading, so you can use them to
exit a soybean position too. Sell one contract of August Soybeans for every
one of November you want to exit. You can then immediately buy equal numbers
of August contracts and sell November contracts on a spread order. Make
sure this is done as a spread on one order. That will liquidate your
November position.
There is no August Corn, so you need to use the options to exit. Normally
you could use synthethic futures (buying an at the money put and selling the
same strike price call) to exit futures positions which are limit down.
However, since the September Corn options only have one week to go this may
be a more economical and manageable way to exit futures positions. I would
suggest buying the September corn 220 puts. The 210 calls are trading about 1
1/2 cents, so that is your time value cost for getting neutral this way.
If you are afraid of the spread risk between Sep and Dec corn, you can always
just buy Dec and sell Sep so you end up in a position long Sep corn and long
in the money puts. You would end up with a synthetic call position.
Regards,
John J. Lothian
Disclosure: Futures trading involves financial risk, lots of it!
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker.
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