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TFC Commodity Trading Forum

Re: Corn...the final solution hahaha/Randolf

Oh OK. I'm just a little paranoid at times,lol. But yes if you look for these tight channels especially with normally volatile markets they are the best ones to buy an Option Strangle on. It's the only strategy where buying cheap out of the money "Calls AND Puts" both can work wonders without needing to be correct on direction. Buying a call AND put 2 or 3 strikes out of the money doesn't often cost that much. And the only way you can lose is for that market to go nowhere as the premium you've paid (which is the entire amount of both are out of the money) erodes over time. This strategy can be done with stocks as well. A person can also just put on Bollinger Bands and scroll through a ton of charts looking for the set ups they call the SQUEEZE too. They are also tight channels of indecision that tend to explode out of the pattern once a decision is made. And the longer the tight pattern exists the cheaper the options get as a rule as they lack volatility and option sellers need to reduce their ask price due to this. Sometimes the premium even out that far on each strike is still expensive and not worth the risk. Option sellers are not stupid but at the same time make a living 'selling' options so have to go with what is being offered. When they lose it's just the cost of doing business. Most of the time they will collect and keep premium. But as long as the tight pattern exists odds favor a sharp move out. Best to have a couple of months of time left on the options and not try to get cute with short term timing on the closest ones available. It is tempting and may work but they can also expire easily and plunge in value fast too. The further out options hold value best plus once the big move has occurred the side that is worth next to nothing often comes storming back and also can make money. That requires time so best to always have lots of time with options. That Corn chart was not the best example of a tight channel actually as it was only about 8 days long. But if you look back at a chart I posted recall I clearly marked the Oct/Nov channel which was exactly the same as the recent one. Price had simply returned to its old channel. Bottom line you want to find a tight channel of a few weeks preferably and place an Option Strangle order on it. Then wait for the "KABOOM"........