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For: Tuesday 06-15-2010

Chicago Lags

The spreads in the wheat complex are still favoring the hard red spring wheat (Minneapolis) and hard red winter wheat (Kansas City) over the soft red winter that is the contract traded at the Chicago Board of Trade. Looking at the spread chart of September KC futures over the September Chicago futures on the weekly chart we see this spread has been grinding higher since the first of the year. The daily charts show a breakout of the previous swing highs on the September futures contract. We will look to buy an option play to try and capture the move if it continues.

Aggressive traders may opt to use futures. As always please consult your personal broker at Great Pacific Trading Company to see if this trade is suitable for your account.

Trade Recommendation: Buy the September Kansas City wheat 520 call and sell the September Chicago wheat 530 call for a debit of five cents. Risk ten cents on the trade initially. (>$500 not including commissions and fees), Look to take profits if the option spread trades to fifteen cents.