Canola Wow!

[bucket]

Errol

I realize we never lose a crop in February or March but its dry out here. Has this started to worry anyone in your circles?

[errolanderson]

Bucket . . . yes, the drought is
certainly on-watch, but from a distance.
We know a timely spring rain can change
things. But don't believe the drought is
the current reason for this rally.

Fund money or what some traders call
'crazy money' is in-the-market and
having its own way. Technicals are
bullish, bullish which is adding to the
buying inferno.

Errol

[bucket]

Errol

Any correlation of this rally to what happened in Febraury 2008?

That month things took off as well. By seeding we were looking at 10 buck peas for september delivery.

[errolanderson]

Bucket . . . I don't know if there is a
correlation. But edible pea prices can
climb into spring. Cdn pea values have
been undervalued as a human protein for
some time. Yellow and green pea trend is
now firm to up in my opinion.

[BTO_farmall]

And here I thought The Internet killed The Agriville Agstarr. Or worse yet The Branch off from Sturgeon Creek Colony bought yous out North of Wpg. Good to see yous back, S.T.A.R. thats what you are!!!!!!!!!!

[wd9]

The beauty of a market like this is
capturing put options at a high price
for the fall for cheap. Nothing like
locking in an absolute no risk good
price for 10 or 15 bucks a tonne to
enter a sell position.

If there is a drought and price goes up,
no delivery commitments, just let the
option expire worthless. If prices go
down, enter a futures sell position at
that strike price on that month, do a
futures buy at the current low position
same month. Sell that canola now for
that lower price cuz the market went
down. Add to it the profit from the buy
low sell high, voila, good price.

Errol, what's the going rates of puts
right now for 510 put for november?

[boarderbloke]

wd9, these numbers are from Friday's close. It looks to me that 510 puts would be $18.90

[URL="http://tfc-charts.w2d.com/marketquotes/RS.html"]Put Prices[/URL]

[boarderbloke]

sorry wd9, the options chart didn't carry through, but if you look at the canola chart that comes up, look at the far right column, "Opt's", move down to the month you want and then click Call or Put, whichever you want.

[wd9]

Cool, thx boarder. So clicking on the
PUT link i see lots of interest in 500 a
tonne canola for nov at 500 costs 16
bucks.

Buy a nov put at 500 bucks.

If price goes to 600 a tonne, don't
excercise your right to buy futures,
rather sell your canola at 600 minus
basis.

If canola goes to 400, use the put to
"sell" futures at 500 and then to get
out of your sell position, "buy" futures
at 400. Buy low sell high, you made 100
a tonne. Sell your canola for 400 minus
basis, but then add the 100 a tonne you
made of the market and voila, its 500
minus basis for your canola.

There is no risk, other than the initial
premium and buck a tonne broker fee to
this strategy. If canola droughts out
and you have none, you neither are
locked into a sell position on the
futures, OR a delivery contract.

But you have the right, not the
obligation, to make 500 minus 17 (broker
and put cost) minus basis if we grow 20
million tonnes and price goes down no
matter how low canola goes.


Basic i know for most whizzes here, but
thought i'd write it out.

[errolanderson]

You may want to take a look at Jan '13
puts as well. The advantage of Jan is
time. You can hold off marketing your
canola until December, when basis levels
are seasonally narrower.

Puts to protect prices are a win win
tool. You win if canola goes to $600 and
they expire worthless and you win if
canola goes to $400 and you cash the
profit. I like them because you can buy
and forget about them (no margin call
risk) and yet have the price guard in
place without delivery obligation.

Errol