Corn Spread Volatility Prompts Trading Strategy Reversal

The JUL-SEP Corn Spread (ZCN27-ZCU27) saw significant movement over the past few days, prompting a review of trading strategies. Rich Moran, Senior Commodities Broker at Walsh Trading, suggested selling the spread on September 29 with a target of +27½. The move was intended to capitalize on the spread's recent volatility, which had taken it from a high of +33½ in mid-September to settle below its 14-day moving average at +27¾.

As of September 29, the Full Carry for Corn from July 2027 to September 2027 stood at 22.04, putting the JUL-SEP Corn Spread (ZCN27-ZCU27) at -22. However, the spread had surged to settle at +27¾ on both days.

Moran recommended risking $325 per spread for a potential profit of $650 or more, depending on fees and commissions. He suggested offering to sell ZCN27-ZCU27 at +27½ or better when the market opened that evening. However, by September 30, the spread had moved down to settle at +19.

Given this development, Moran advised traders who were short ZCN27-ZCU27 at +27½ to try to buy back into the spread with a limit of +21 on opening. If successful, this would still yield a profit of $325 per spread, which was the initial risk level.