Trade Description
Buy one August Soybean 740 call and sell two August Soybean 780 calls for a credit of $250.  Options expire on Friday, July 22nd, 2005.  Margin is roughly $600, but can fluctuate depending on market price in relation to time value and volatility. 

Explanation
Seasonal weather volatility has caused a technical bull futures breakout and volatility premium spike in soybean options.  This time of year typically offers choppy trade, but there is always the element of a major weather issue that causes a sustained rally.  This trade design allows for a profit price zone at expiration of 0 - 8.25.  This type of ratio spread is intended to create a market definition that allows for upside movement in a realistic fashion and plays against a massive spike to the upside over the time frame of the trade.

Profit Scenarios
Max profit at expiration is $2,250 (assuming an entry fill of a $250 credit) and occurs at expiration with the market at 7.80.  Profit is reduced by $50 per point below 7.80 to 7.40 whereas profit below 7.40 is the credit received on the trade ($250).  Profit, at expiration, is also reduced by $50 per point above 7.80 until 8.25, which is the breakeven point to the upside.

Risk Scenarios
Max risk is unlimited.  Loss occurs at expiration with the market trading above 8.25 and is $50 per cent above that price.

Disclaimer
There is risk of loss in all commodities trading.  Commissions and fees vary per individual and therefore are not included in profit, cost and risk scenarios.  Please consult a licensed broker before you trade for the first time.  Losses can exceed your account size and/or margin requirements.  Commodities trading can be extremely risky and is not for everyone.  Some option strategies have unlimited risk.  Educate yourself on the risks and rewards of such investing prior to trading.  James Mound Trading Group, or anyone associated with JMTG or moundreport.com, do not guarantee profits or pre-determined loss points, and are not held monetarily responsible for the trading losses of others (clients or otherwise).  Past results are by no means indicative of potential future returns.

James Mound, owner of JMTG Brokerage LLC, MoundReport.com and author of the book 7 Secrets, writes the Weekend Commodities Review Newsletter. Receive your free weekly subscription to the Weekend Review by e-mail. Click here.