About the Author
J. Steven Tucker
J. Steven Tucker is a Certified Public Accountant. He has had his own CPA practice in Winston Salem NC since 1987. His areas of practice include financial planning as well as tax planning. Also, for several years now, he has been trading commodities.
I wrote yesterday about using the Contra Extreme Strategy to get short in March Corn with a put option. With the markets having been so volatile over the past couple of months there are several markets that are due to have compensating corrections.
Several of these markets are in the grains, such as Wheat and Oats. Most of the grain markets rocketed to contract highs on October 12, 2006 after the Department of Agriculture released its report. Take a look at the December Wheat chart. Wheat has gone almost straight up since September 28. Prices have corrected some since the contract high of 557 on October 17. As of whis writing December Wheat is at 510, but according to the 50 percent rule, Wheat could correct all the way down to 475, providing a decent profit opportunity. December Oats has gone from 187 on August 31 to a contract high of 247.75 on
October 12. Oats could potentially correct down to 202 according to the 50% rule.
Of course the Contra Extreme strategy does have its risks. After all, these grain markets have been in extremely powerful uptrends and these uptrends could certainly continue. As they say in trading, "The Trend is your friend-until it ends." Many traders, myself included, prefer to trade with the Trend. But, sometimes a corrective move looks so likely that it's hard to resist taking a chance on a trade. I do feel with options, the risk can be managed.
As for my March Corn trade, my March Corn 300 put option is down, as of this moment, 1.1 cents from yesterday's close or a drop in value of $55.
Next time I discuss some Contra Extreme strategies in the Energies.
For more information on the basics of trading commodities and options, please go to my website, www.mylearn2trade.com.
Published by J. Steven Tucker on October 19, 2006 01:20 PM
