Posted on July 8, 2020
This week’s trade seeks to leverage a budding breakout in the soybean field.
Soy is in the midst of a bullish move that we believe could carry significantly.
Then there’s the technical picture, which is also strong.
To wit –
This is chartage for the last half year of the Teucrium Soybean Fund ETF (NYSE:SOYB), and it clearly shows a commodity in early breakout motion.
It all spells breakout from our point of view.
And that, despite the fact that the commodities have been gut-punched by ongoing trade wars and the current, global corona-inspired economic slump.
With all the foregoing in mind, we’re going to make a fairly straightforward call on today’s soy crop by buying a synthetic long position.
Like this –
A Jew and His Gold recommends you consider the purchase of a SOYB February 19th 14 CALL for $1.35 and sale of the SOYB Februry 19th 14 PUT for $0.70. Total debit on the trade is $0.65.
Rationale: The bullish nature of the set-up justifies the synthetic long position. As constituted, the upside profit potential is unlimited.
So, too, though, is the downside.
We take comfort, though, from both the above fundamental/technical picture, and the fact that, when trending, SOYB moves in increments of roughly $0.10 a day, on average, meaning the options barely budge.
That said, you’ll have to figure your personal pain threshold, and set an appropriate STOP, say, when the spread between the options widens to _________ (fill in your “UNCLE” here).
According to our read of the charts, we feel confident holding the trade until SOYB $13.85. Below that, we’re out.
Many happy returns,