There seems to be tons of information out already about the large crop. Could we be surprised with this number? We doubt it, yet front month vol is quite high given all the knowns that are already out there.

Oct at the money Soybeans trading 21%, 840 straddle trading 24 1/4¢

Oct at the money Corn trading 21%, 370 straddle trading 11¢

Oct at the money Wheat trading 29%, 520 straddle trading 20 3/4¢

Wheat has been (and usually is) wild lately, so that vol is harder to play. But it seems that the corn and beans are quite high and will get crushed tomorrow, its just a matter of how much we move.

If you’re of the opinion that the market will be largely unimpressed by anything the USDA puts out, then you could do well selling front month ATM straddle and buying a wide back month strangle (as protection) for a large credit.

If you think we’re moving tomorrow, buying the front month straddle at these elevated vol levels probably isn’t the way to go, buy an out of the money back-month call, put, or strangle and hold unhedged. vol will get hit (most likely) but if you’re right, the value should still appreciate better than the front month.