By Jon Scheve, Superior Feed Ingredients, LLC
Due to COVID-19, two recent straddle trades didn’t go as planned. While it’s always disappointing when this happens, it’s important to review what happened, what can be learned from the situation, and how to move forward in a positive way.
My history with selling straddles
Since 2016, selling straddles has represented about 30% of my grain marketing strategy. I use them to try and capture profit from a sideways market. The trade involves selling both a put and a call at the same strike price.
Selling straddles can force sales at higher values, which makes for a strong strategy. As a producer I’m happy with rallies because, I always have more grain to sell at higher prices. Selling straddles helps me maximize profit potential when the market stays sideways, which has happened a lot in the last 3 years.
The downside of selling straddles
Straddles don’t have a built-in floor price, which opens me up to unlimited downside risk.… Continue readingRead More »