The most recent sell-off from Sep 8 17 thru today has been sharp & nasty - Dropping 4cents in 20 trading days. However, there is mounting evidence that the drop is over, and that a new advance will be commencing shortly. Lets take a look.
1 - The Huge selloff 2 weeks back, occuring at the end of a 20day 10% decline, indicates a washout.
2 - The current week supports the thesis, as it signals indecision after the selloff.
3- The current week report shows that during the washout, Producer Merchants bot a astounding 45k contracts in 1 week, scoring a 100% ranking on a 18m+5yr basis. This setup offers 2-1 odds in favor of bulls in all instances going back to 2006.
4 - Seasonals are also in our favor with a impressive Oct-Nov winning % of 67%, going back to 1995.
We can't post those data tables here, but you can see them at our blog on the 3ptcap site linked above.
Given the condition we want to structure a long bet here.
As it is Noon Sunday as of the time of the post we can't provide Trade economics. But you'll want to do something as follows:
1) Go Long 1 bean oil future at 33 cents.
2) Buy a Long dated put at the money.
3) Once the trade moves 1 cent in your favor, sell a OTM call - Offsetting some of your insurance cost, while still providing some upside potential.
This should get you at least 2-1 R/R, probably much better. The key here is that the ATM put is your insurance & locks in your maximum downside on the bet. Never Trade without hedges in place, as the inherent Leverage can destroy your capital in a adverse outcome.