Trade Description
Sell one September Corn 2.30 put and sell one September Corn 2.50 call for a credit of $450 or more.  Options expire on Friday, August 26th, 2005.  Margin is approximately $100 but can fluctuate based on price action, volatility and time. 

Explanation
After several weeks of extreme volatility in corn, created by weather concerns and hurricanes, the market appears set to establish a range and reduced underlying volatility.  A short strangle, while offering unlimited risk and defined reward, offers a high probability of success and plays the more likely event.  Moreover, because of corn's recent price action the option premium has expanded and offers sellers a solid premium to collect.  This strangle plays an at expiration profit zone of 2.21 to 2.59.

Profit Scenarios
Max profit is the credit received on the trade ($450) and occurs at expiration with the market between 2.30 and 2.50.  Profit is reduced by $50 per cent below 2.30 to 2.21 (downside breakeven) as well as from 2.50 to 2.59 (upside breakeven).  Time value reduces profitability.

Risk Scenarios
Max risk is unlimited.  Loss, at expiration, is $50 per cent below 2.21 as well as $50 per cent above 2.59.  Time value increases potential loss.  It is recommended to cover the trade (not participate in futures) should the market trade through 2.21 or 2.59 during the course of the trade.  Aggressive traders can expand the exit prices, but doing so (while increasing potential probability of success) increases potential losses accordingly.

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.