1 Options Trade to Play the Rebound in Wheat Prices Here

Consider buying a call option on December soft red wheat (SRW) (ZWZ25) wheat futures

See on the daily bar chart for December soft red winter wheat futures that price action Wednesday produced a technically bullish “key reversal” up, whereby prices hit a contract low and then rebounded to produce a higher high than the previous trading session. That is one chart clue that a market bottom is in place. And, there was decent follow-through buying strength early Thursday morning. See, too, at the bottom of the chart that the moving average convergence (MACD) indicator is now in a bullish posture as the blue MACD line has just crossed above the red trigger line.

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Fundamentally, recent economic data out of China, the European Union and India has been more upbeat, which suggests better global demand for grains. There have also been some weather problems in Canada and Asia that could crimp production in those areas.

Consider buying a call option on December SRW wheat futures, with an upside price objective of at least $6.00, or above. The option expires the third Friday in November.

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IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%): 

Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you. 

On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.