David Hightower's guest appearances

David Hightower

The Long & Short of Futures Options

Compound Interests with Jon Najarian

Kevin O'Leary

Lennox Lewis

Manny Khoshbin

Jack Schwager

Zachary Karabell

Sven Henrich

Martyn Ford

Galen Moore

Leanna Haakons

Doug Flutie

Bill Capuzzi

John Kass

Larry McDonald

Blu Putnam

Luke Pergande

OwlTail

David Hightower it the President of The Hightower Report. A commodity research and information firm specializing in high quality futures research and analysis for individual investors, brokers, commercial producers, farmers and end users. David has 30 years experience in the commodity and financial futures industry.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

David Hightower it the President of The Hightower Report. A commodity research and information firm specializing in high quality futures research and analysis for individual investors, brokers, commercial producers, farmers and end users. David has 30 years experience in the commodity and financial futures industry.See Privacy Policy at <a href="https://art19.com/privacy" rel="nofollow" target="_blank">https://art19.com/privacy</a> and California Privacy Notice at <a href="https://art19.com/privacy#do-not-sell-my-info" rel="nofollow" target="_blank">https://art19.com/privacy#do-not-sell-my-info</a>.

Episode 14 - David Hightower

The guest this episode is David Hightower: Founder of the Hightower Report (http://www.futures-research.com/) David sat down with Mark to discuss a wide array of agricultural options strategies including: Corn Strategies(Strategies range from weakest to strongest)  BUY 1 December Corn futures contract and BUY 2 May Corn short dated new crop (SDNC) just out of the money puts for around 8 cents each. The strategy allows the hedger to be fully priced ahead of the upcoming reports, and it also allows protection against possible bearish report news. And if a sharp break continues into early April, one or both of the puts could be lifted prior to April 24th expiration to essentially lower the base hedge price. Less Aggressive Strategy: With May Corn trading near $3.85, BUY 1 April Corn week 2 $3.85/$4.10 bull call spread for net premium of about 7 1/2 cents, and then SELL 1 April Corn week 2 $3.80 put for about 6 1/2 cents. Owning the week 2, right on the money call spread provides close - in price sensitivity for low cost, but the hedge is limited because the strike price for the short call position is only 25 cents higher. Selling the out of the money put further reduces the cost and leaves budgetary room for future risk coverage beyond this relatively short time frame. Limiting outlays into the first key pivot point of 2015 might allow for fresh hedges at lower prices. With December Corn trading near $4.09, BUY a December Corn $4.40 call for around 23 cents and SELL 1 May Corn SDNC $4.10 call for around 12 cents.This strategy offers long term protection with a chance to finance a portion of the hedge costs. The May SDNC calls have only 30 days until expiration, and they could see a significant loss in value if prices decline. They will also lose value in a sideways market. The long December Corn call position is the hedge in this case, while the short dated new crop call is a financing vehicle or a "hedge of the hedge." If the market continues to trend lower into the April 24th expiration, the hedger will have reduced the cost of owning the $4.40 call to just 11 cents. The December calls do not expire until November 20th. Macro Hedge-Using Soybeans as a Shield against Higher Corn Prices With November Soybeans trading near $9.57 and December Corn near $4.09, SELL a June Soybean SDNC $9.60 call for around 28 cents and BUY 2 June Corn SDNC $4.10 calls for a combined cost of around 31 cents. The net cost of the spread is minimal at only 3 cents. The hedger is attempting to collect call premium from a market that appears to have a potential to build significant supply and invest that premium in a market that could easily become tighter. If soybean acres increase sharply, corn acres will likely decline, which could lead to a dramatic tightening of corn stocks and higher corn prices.  Soybeans Strategies(Strategies range from weakest to strongest)  Minimal Hedge, Moderately Bearish Price View BUY 1 Week 2 April Soybean at the money call for around 20 cents (16 days coverage). The potential for huge ending stocks, heavy flow of South American, soybeans onto the global market and an expected adjustment higher in 2015 soybean plantings should increase the chance for prices to fall in the near future. Commercials and end users may want to postpone their prompt and forward purchases. This hedge strategy provides coverage against a bullish surprise for very little cost. The main drawback is the short duration. Slightly More Aggressive, Increased Sensitivity &amp; More Time: BUY 1 May Soybean SDNC at the money call for around 20 cents (30 days coverage). Expectations for heavier planting acreage, increased South American export competition and residual knock-on from deflationary view should increase the odds of lower cash prices ahead. Expend minimal hedge call premium and secure some upside protection beyond the March 31st report and into the early planting window. More Aggressive Strategy - Attempt to Finance Forward Hedge Cost with Decay and Flat Price Weakness With November Soybean futures trading near $9.57, SELL 1 June Soybean SDNC $9.40 call for 38 cents (56 days coverage), and then BUY 2 November Soybean $10.40 calls for 32 cents each or 64 cents total (212 days coverage). Net premium paid 26 cents. Financing longer term calls with an aggressive short-term bearish play using short calls. If futures rally 50 cents in the coming month, the short SDNC call position will show a loss of roughly 15-17 cents, depending on time decay and volatility. On a 50-cent rally, the 2 November calls should appreciate roughly 40 cents in total. In short, this strategy offers moderate hedge coverage with reduced out of pocket expense and the chance to collect some premium using from the short-dated calls. To further reduce the cost of the hedge, traders could consider selling the April Soybean week 2 $9.40 puts for 7 1/2 cents, as soybeans are already down from the March highs and are somewhat oversold. SDNC Soybean Hedge/Ratio Back Spread With November Soybeans trading near $9.57, SELL 1 July Soybean SDNC $9.40 call for around 47 cents and BUY 3 July Soybean SDNC $10.00 calls for around 63 cents total. This initial delta is long about 40% of 1 futures contract. The strategy performs best if the market is weak in the next 30 days. As long as the short call remains in place, the hedge will remain sensitive into the middle of May, after which the short call component will reduce performance and increase risk. In the event of a surprise, extended rally, the hedge position could extend its sensitivity to the equivalent of almost 2 full futures contracts. This strategy has a low net out of pocket expense. It doesn’t perform well on a minor rally that comes to a halt, but it will reap windfalls if prices rally straight-away. 

The guest this episode is David Hightower: Founder of the Hightower Report (<a href="http://www.futures-research.com/" rel="nofollow" target="_blank">http://www.futures-research.com/</a>) David sat down with Mark to discuss a wide array of agricultural options strategies including: Corn Strategies(Strategies range from weakest to strongest) <ol> <li>BUY 1 December Corn futures contract and BUY 2 May Corn short dated new crop (SDNC) just out of the money puts for around 8 cents each. The strategy allows the hedger to be fully priced ahead of the upcoming reports, and it also allows protection against possible bearish report news. And if a sharp break continues into early April, one or both of the puts could be lifted prior to April 24th expiration to essentially lower the base hedge price.</li> <li>Less Aggressive Strategy: With May Corn trading near $3.85, BUY 1 April Corn week 2 $3.85/$4.10 bull call spread for net premium of about 7 1/2 cents, and then SELL 1 April Corn week 2 $3.80 put for about 6 1/2 cents. Owning the week 2, right on the money call spread provides close - in price sensitivity for low cost, but the hedge is limited because the strike price for the short call position is only 25 cents higher. Selling the out of the money put further reduces the cost and leaves budgetary room for future risk coverage beyond this relatively short time frame. Limiting outlays into the first key pivot point of 2015 might allow for fresh hedges at lower prices.</li> <li>With December Corn trading near $4.09, BUY a December Corn $4.40 call for around 23 cents and SELL 1 May Corn SDNC $4.10 call for around 12 cents.This strategy offers long term protection with a chance to finance a portion of the hedge costs. The May SDNC calls have only 30 days until expiration, and they could see a significant loss in value if prices decline. They will also lose value in a sideways market. The long December Corn call position is the hedge in this case, while the short dated new crop call is a financing vehicle or a "hedge of the hedge." If the market continues to trend lower into the April 24th expiration, the hedger will have reduced the cost of owning the $4.40 call to just 11 cents. The December calls do not expire until November 20th.</li> <li>Macro Hedge-Using Soybeans as a Shield against Higher Corn Prices With November Soybeans trading near $9.57 and December Corn near $4.09, SELL a June Soybean SDNC $9.60 call for around 28 cents and BUY 2 June Corn SDNC $4.10 calls for a combined cost of around 31 cents. The net cost of the spread is minimal at only 3 cents. The hedger is attempting to collect call premium from a market that appears to have a potential to build significant supply and invest that premium in a market that could easily become tighter. If soybean acres increase sharply, corn acres will likely decline, which could lead to a dramatic tightening of corn stocks and higher corn prices.</li> </ol> Soybeans Strategies(Strategies range from weakest to strongest) <ol> <li>Minimal Hedge, Moderately Bearish Price View BUY 1 Week 2 April Soybean at the money call for around 20 cents (16 days coverage). The potential for huge ending stocks, heavy flow of South American, soybeans onto the global market and an expected adjustment higher in 2015 soybean plantings should increase the chance for prices to fall in the near future. Commercials and end users may want to postpone their prompt and forward purchases. This hedge strategy provides coverage against a bullish surprise for very little cost. The main drawback is the short duration.</li> <li>Slightly More Aggressive, Increased Sensitivity &amp; More Time: BUY 1 May Soybean SDNC at the money call for around 20 cents (30 days coverage). Expectations for heavier planting acreage, increased South American export competition and residual knock-on from deflationary view should increase the odds of lower cash prices ahead. Expend minimal hedge call premium and secure some upside protection beyond the March 31st report and into the early planting window.</li> <li>More Aggressive Strategy - Attempt to Finance Forward Hedge Cost with Decay and Flat Price Weakness With November Soybean futures trading near $9.57, SELL 1 June Soybean SDNC $9.40 call for 38 cents (56 days coverage), and then BUY 2 November Soybean $10.40 calls for 32 cents each or 64 cents total (212 days coverage). Net premium paid 26 cents. Financing longer term calls with an aggressive short-term bearish play using short calls. If futures rally 50 cents in the coming month, the short SDNC call position will show a loss of roughly 15-17 cents, depending on time decay and volatility. On a 50-cent rally, the 2 November calls should appreciate roughly 40 cents in total. In short, this strategy offers moderate hedge coverage with reduced out of pocket expense and the chance to collect some premium using from the short-dated calls. To further reduce the cost of the hedge, traders could consider selling the April Soybean week 2 $9.40 puts for 7 1/2 cents, as soybeans are already down from the March highs and are somewhat oversold.</li> <li>SDNC Soybean Hedge/Ratio Back Spread With November Soybeans trading near $9.57, SELL 1 July Soybean SDNC $9.40 call for around 47 cents and BUY 3 July Soybean SDNC $10.00 calls for around 63 cents total. This initial delta is long about 40% of 1 futures contract. The strategy performs best if the market is weak in the next 30 days. As long as the short call remains in place, the hedge will remain sensitive into the middle of May, after which the short call component will reduce performance and increase risk. In the event of a surprise, extended rally, the hedge position could extend its sensitivity to the equivalent of almost 2 full futures contracts. This strategy has a low net out of pocket expense. It doesn’t perform well on a minor rally that comes to a halt, but it will reap windfalls if prices rally straight-away.</li> </ol>

The Long and Short of Futures Options: Talking Ag Options Strategies With David Hightower