Selling Wheat Puts

I do not make wheat recommendations often, but wheat prices have not been at this level since 2006.  That said, I believe wheat has found a bottom, at least for a few months.  I don't know how much higher wheat can go, but I see wheat doing no worse than moving sideways.  If you are a wheat grower, and you are buying protection here with options, you are probably wasting your money.  In a sideways to higher trending market, a better strategy would be selling wheat puts.

Had you used this strategy to sell December wheat puts the last time we had this set up in early September, you could have collected around 35 cents.  Because they would have expired last month, you would have kept all the premium.  I think we face a similar scenario today.  March wheat puts are 35 cents a bushel. 

Fundamentals do not favor corn this year.  Entering the 2017 marketing year, I have yet to make a corn sell recommendation.  Getting above average prices may be challenging.  I am recommending selling $4.30 March wheat puts here against 100% of your corn marketings that you expect to grow and collecting .35 per bushel.  This is a fairly low risk strategy which can add revenue to this years marketings. ​

The worst case scenario would be if wheat drops below $3.95 at expiration.  At that point, you would be on the hook penny for penny below $3.95, so the strategy is not without risk.  I do believe however that wheat is at an actionable point here, and will benefit from a weaker dollar as well as the usual seasonal strength in the market durring the crop insurance price discovery period.