PitNews.com | Futures News - Option Trade of the Day

Option Trade of the Day by Commodity Training School Date: 05/08/12 Estimated Update: 05/22/12 Company: Commodity Trade School Phone: 1-877-270-8403 eMail: info@commoditytradingschool.com Website: www.commoditytradingschool.com 05-08-12 November Beans- Look as if they might have possibly topped out in the last few weeks as farmers are entering the fields to do their planting. With the current price way above the ten year average we feel that farmers are going to plant as much as they can to take advantage of the current price, which should drive prices lower, possibly as low as under 10.00 per bushel by November. We are recommending the November 1300/1200 bear put spread (buy the 13 put-sell the 12) which is selling for about $1,900. We also recommend selling the November 15 call for 34 cents ($1,700) or better to offset much of the cost of the bear put spread which in turn gives the trade an intrinsic break even of 1296 not including commission and fees. The risk on the trade is above $15 and is unlimited while the profit potential is $5000 before deducting your costs. The margin requirement is approximately 2,500 (due to short call). Based on our target of around 9 dollars per bushel we also recommend and like out of the money puts.

There is a substantial risk of loss in trading futures and options. FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN- THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION OF THE UNDERLYING FUTURES CONTRACT. PLACING CONTINGENT ORDERS SUCH AS "STOP LOSS" OR "STOP LIMIT" ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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