Overnight, March Corn was unchanged at $4.16 per bushel following an impressive rally within the trading range yesterday.  The included chart shows that rally.  What may be very important about yesterday’s rally is that fact that prices managed to close above the minor rally high from a week ago and the ADX line has now begun to turn upward while the directional movement indicators are bullish.  I believe that most of the farmer selling is behind us and the long positions that the futures funds hold are beginning to win the battle.  Today, I recommend a multi faceted trade in May Corn.  I recommend attempting to sell short one May Corn $3.70 strike put option for around 9 cents, and then attempting to buy one May Corn $4.30/$4.60 vertical call spread for about 10.5 cents.  The short put strike is located just under the recent trading range and the premium received would pay for most of the call spread that we want to purchase.  If everything works perfectly and rallies, the potential gain in this trade would be the difference between call strikes, $30 cents, plus the short put option premium of 9 cents, minus the cost of the call spread, 10.5 cents for an overall gain of 28.5 cents or $1425 gross.  That is of course if we hold the trade all the way to expiration.  The risk on this trade is 1.5 cents if prices stay above $3.70 and below $4.30 all the way to expiration.  If May corn prices trade below $3.70, the our risk would be unlimited.  I would be recommending to liquidate the trade if prices closed below $3.70, if not much sooner.  In the near term, if prices break out to the upside and reach past $4.60, I would probably look to take profits on the entire trade early, whatever that may be at the time.  I also recommend holding our other positions already in place for now.

 Followers of this letter should be long one March Corn ($4.30 strike) call option from 17 ¼ cents and short 2 March Corn ($4.90 strike) call options at 7 3/8 cents each.  (As a result of the profit made on the short $3.20 puts, our cost basis of this ratio spread is now a 1 cent credit!)

There are 52 days left until March options expire.

 David Hall

 The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 This newsletter is not intended for dissemination to the public without prior approval from David Hall.