• Market:  January 2007 Corn (CH7)** January options trade based on the March futures price.
• Tick value: 1 cent = $50
• Option Expiration: 12/21/06   
• Trade Description: Long put
• Max Risk: $250
• Max Profit: unlimited

Buy one January 2007 Corn 340 put for a maximum cost and risk of 5 cents ($250) or less to open a position.

Technical / Fundamental Explanation
Corn has been on a wild bull run but we are clearly seeing signs of a stall. This is likely to be the stall before the fall and we are positioning to capitalize on this pullback by purchasing these cheap near the money puts. Markets usually fall three times faster than they rise so if we break support at 360 we could easily see a slide back to 320 or lower. Longer term we remain bullish but near term this market needs to correct. We have already seen wheat correct substantially we could see this market really start to pull back and take corn with it.

Profit Goal
Max profit, assuming a 5 cent fill, is unlimited. The break even point at expiration is 335.

Risk Analysis
Max risk, before commissions and fees, and assuming a 5 cent fill, is $250. This occurs at expiration with March Corn trading above 340.

Derek Frey is Head Trader at Odom & Frey Futures & Options.

Disclaimer
Past performance is not indicative of future results. Trading futures and options is not suitable for everyone. There is a substantial risk of loss in trading futures and options.