Aug Month End, Where Do We Stand?
The last trading day in Aug is upon on and we are seeing soybeans bounce after coming within 2 cents of the mid-July double bottom. This could be the beginning of a turnaround, or just some month-end profit taking after a 70¢ decline.
Corn is up today after a couple of steady days. It seems to be more of a Bean follower lately.
Wheat is up today after finding some renewed short-term bullish interest.
Tuesday could be helpful in establishing a direction for these commodities going forward. At the same time, I wouldn’t expect any major fireworks as there seems to be a decent equilibrium in place. Barring major trade developments with China, there isn’t much market-moving news on the horizon. Nothing that should be terribly shocking at least.
Considering what we know, and the time of year, volatility seems pretty high. The past few years funds have been anxious to sell volatility earlier and earlier and holding the shorts (collecting theta) over the winter. Last year at this time, Dec corn vol was 19%, only to be sold down to under 13% by mid-October. Last year on this date, Nov and Jan Soybeans were already under 15%.
While being short low volatility isn’t a great strategy for most people, it’s worth noting when the funds have historically sold in order to minimize losses and better time your buys.