Ethan Koehler

If you’re a producer, the quoted tweet described you 3 weeks ago, and you’re starting to get bullish and lift hedges *after* a nearly 15% rally; I have a few things you may want to consider. (opinions to follow - see disclaimer at the end) 1. Assuming you carry a reasonable RP crop insurance policy (and hopefully ECO/SCO, too, but I digress), and your yield expectations and hedge/cash market positions haven’t changed; you’re probably much longer today than you were right before the report. This is largely because of the gamma of embedded put-like protection in your crop insurance. 2. If you’re buying rallies and selling breaks you are (by hamfistedly replicating a long straddle) essentially adding to your long gamma position via those trades. All that whipsawing actually increases your risk in a market that finishes little changed on the year. Because you’re probably already long gamma via your crop insurance, you should tend to sell rallies and buy breaks to help manage the associated theta. 3. If this doesn’t make any sense to you, track down someone who can explain it, and take the time to really understand. Of course, I’m speaking in broad generalities. Your specific situation should drive your hedging decisions. This is not advice, it’s my opinion only. Trading futures and options is risky and not for everybody. Past performance is not necessarily indicative of future results.