New Synthetic Wheat Strategy

One of the easiest ways I have found to create some additional revenue is through selling wheat puts at intermediate cycle bottoms.  Since I recommended selling 50% of your wheat back on July 11, wheat has moved lower it seems every day.  Wheat has now lost $1.15 per bushel since I made the sell recommendation.

There are usually 2-3 intermediate cycle lows every year.  These moments are where we expect bottoms to occur which will last several months.  This is where you have a high likelihood of profiting from selling puts.  Rallies out of intermediate cycle lows tend to be strong.  For an option sale to be successful, we only need price to trend higher or sideways for a couple months.  80% of all options expire worthless, so the real money to be made is in selling the options, not buying them.  The chart below shows we should be nearing the time for an ICL to occur.  Price has already broken the IC trend line which should confirm that a new intermediate cycle will begin once a bottom has been put in place.

​I have implemented this synthetic strategy twice this year.  The first time in December when we collected .35 per bushel, and the second time in April when we collected .31 per bushel.  66 cents makes a huge difference in a year like this year. 

​I won't pretend to know right now exactly where this bottom is going to occur, but if price can manage to break below the April ICL....say to the 480-470 range, it will probably trigger a buy signal on the CCI.  CCI buy signals have a pretty good track record for marking major bottoms.

Believe it or not, sentiment readings are still not at extreme bearish levels like I would prefer to see, but I will feel pretty good when the CCI says to buy.

We are into the time of year when average returns from owning wheat are the strongest.  Below is the seasonal wheat chart from Sentiment Trader.

If this is a strategy you might be interested in implementing to gain some price premium to your wheat, corn or soybeans let me know.  If you need a brokerage account, now is the time to get one opened.  Click here if you need one.  You don't have to fund the account to open one.  Like I had mentioned, rallies out of ICL's tend to be strong.  You don't want to waste valuable option premium by waiting around trying to get  your account opened.  When I see what I believe is a bottom, I will detail the trade recommendation here.