AgResource had a nice informational piece on summer rallies and historicals behind them. I’ll summarize below…
The December corn contract opened April at $5.67 and has since fallen below key support levels to $5.12.
The chart below from AgResource explains that over the last 20 years, we’ve had a median summer (April-July) rally of 12% (low being 2% and high being 52%). If we apply a 12% rally based on this history: $5.67 x 12% = .68c OR $5.67 + .68c = $6.35.
With technicals being at the lower ends of the range in an oversold condition and you want upside option flexibility in your seasonal pre-harvest marketing plan, this pullback is giving us an opportunity relative to the values we were trading earlier in the year.
Noteworthy, there are just 3 years that a growing season rally of 5% or more did not occur, 2014, 2018 (china trade war), and 2020 (covid).
The quotes below are September full dated call options. I’m looking at full dated September’s for the longer time frame and in the event of a late rally and the September contract typically rallies faster than the December.
Sept 530 Calls cost ~25c
Sept 570 Calls cost ~13.5c
Sept 600 Calls cost ~8.5c
Call to discuss!