Bean Option Recap From Jon Karmin

Beans jumped overnight on frost fears but broke hard as the overnight session ended and again early in the day session. Most frost scares are just that, “scares.”  In my 30 years down here there have only been maybe a couple of frosts which have truly done significant damage to yields.  Most frost scares provide opportunity to short the market.  Furthermore, the frost is mostly expected in North Dakota which only produces 7% of the entire crop.  So even if you do get a frost in North Dakota and nick a bushel here or there on 7% of the crop then there should only be a negligible effect on price if anything at all.  More significantly, we learned from the COT after Friday’s close that there are record shorts in beans. Weak shorts exiting the market could perpetuate a short term move upward but I feel it would only be temporary as was seen last night.  Additionally, most of these shorts have ample cushion in their positions to weather any short term rallies.  On the option front I am looking for generally steady vols leading up the report on Thursday.  If vols do pop in the next couple of days before the report I will be looking to establish a SX ratio put spread which should be cheaper from higher vols but far enough down the skew which I feel I would not be exposed initially to a hard break on Thursday.  A stronger dollar also pushed down prices early today. SV vol  21.625 up .125, SX vol  20.625 up .125, SF vol 19.125 down .125, SH vol 18.5 down .5

 

Straddles

 

SV 1010 39.5-40

SX 10101 59.5-60.5

SF 1020 84-85.5

SH 1020 102-103

 

Rosenthal Bot 400 Jul 860 Puts/ Sold 1600 Mch 800 Puts even

ABN Bot 250 Mch 1080 Calls/ Sold 500 Mch 1180 Calls 12.5 db

JP Morgan Sold 500 Nov15  1200 Calls 17

Rosenthal Sold 500 Nov 1040/1100 Call spds 12.5 credit

JP Morgan Sold 1000 Nov15  1180 calls 19

Obrien Bot 800 Nov15  1300 Calls 6.625-7/ Sold 72 Nov15 futures 1022

JP Morgan Sold 1000 Jul 1180 calls 15.25-15.5

Obrien Bot 800 Nov 960 Puts 12.25-12.5

Jefferies Bot 400 Jul 1000 Puts/ Sold 600 Jul 920 Puts 14 db

ADM Sold 200 May 1080 Calls 35-35.5

Marex Bot 200 Nov15  1100 Calls/ Sold 1000 Nov15  1300 calls 1 db- .5 credit

Goldenberg Bot 200 Jul 1000 Puts/ Sold 300 Jul 920 Puts 14 db

 

Jon Karmin (JSK)/Jeff Pogonitz (POG) Brokerage

 

Data source: Jon Karmin and Jeff Pogonitz bean option brokers