Foods and Fibers: Last week I penned, “The 20 and 50 DMAs’ bullish crossover occurred this past week, and with both averages slopping up, the target seems attainable sooner than later. However, a failure here could send futures back down to the $3.43 - $3.75 trading range. As such, those with long exposure may consider modulating position size by fading this rally (June 14, 2010 Options Pro Report).” If you hadn’t already faded the rally on Friday, Monday gave you very little opportunity to do that. Sunday’s Globex session traded down 7 cents and when the pit session opened Monday it was down 13 cents. Hot and dry weather miraculously disappeared from the radar screens and subsequently sent corn prices down back into the $3.43-$3.75 range with September futures closing the week at $3.71-2. To be clear, this is not me saying I told you so, but rather sharing my disappointment. The slide in price resulted in implied volatility contracting. This was not helpful to either of the trades in the June 14, 2010 OPR, but in particular for the back ratio spread. Unfortunately there is risk of loss in trading.
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