This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How to Play a Possible Drop in Corn Prices

NEW YORK ( TheStreet) -- The grain complex hasn't been lacking in excitement in recent weeks.

This summer's drought across the Midwest has caused huge spikes in the complex across the board, with wheat, soybeans and corn all shooting higher. Corn has recorded new all-time highs, topping out at $8.49 per bushel on Aug. 10 (December futures contract).

Following that day's USDA crop production, supply and demand report, corn made new highs, only to close lower by the end of the session. Although there are a lot of fundamental factors affecting this market now, from a technical standpoint that could possibly be interpreted as a top. Maybe not long term but quite possibly short term.

Corn has risen over 60% in a matter of weeks. In my experience, markets don't typically go straight up or straight down. Therefore, I feel there is a strong likelihood of some back-and-fill trade. There is also a gap on the daily chart down at 675-683. At some point, odds are good that this gap will fill.

Because the market has not been able to extend highs recently, I feel a short position taken here could potentially have a large profit potential in the coming weeks. For those who agree and think a retracement in this market is likely, here is one way to potentially take advantage of this retracement should it occur. Please note today is Aug. 28, and the trade is based on the most recent data: 1. Sell 1 December corn futures contract at $8.00 or better good-until-canceled 2. Place a protective stop above yesterday's high of $818 good-until-canceled 3. Target the gap fill down in the $675-683 area

Stop may be trailed based on an individual's risk tolerance and money management preferences.

Risk-on trade: $945 including a $45 R/T commission inclusive of all fees.

Profit potential: theoretically unlimited down to zero. If target stated above is reached, profit would be $6,205 after subtracting a $45 R/T commission inclusive of all fees.

Please note that mini-corn contracts may be used, in which case risk and profit potential would be one-fifth of above amounts.

Please note: Futures and options trading is inherently risky and isn't suitable for all investors. Past performance isn't indicative of future results. Stop-loss orders meant to limit losses may not be effective because market conditions may make it impossible to execute such orders.
Matt Zeman is a trader at Kingsview Financial. He began his trading career as a runner in the grain pits at the Chicago Board of Trade before becoming an arbitrage clerk. Eventually he started trading equity options and stocks. Matt now is a full-time futures broker. He has been a frequent guest on CNBC, Fox and Bloomberg, and provides his views on the stock, bond and futures markets for financial media including Dow Jones, the L.A. Times and The Associated Press. Matt is a member of the Chicago Board of Trade, and carries series 3, 7 and 66 licenses.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.24 -0.41%
FB $117.81 -0.21%
GOOG $701.43 0.82%
TSLA $211.53 -4.96%
YHOO $36.94 2.61%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs