A Low-Risk Play on Thursday's USDA Report

A recent plunge in wheat prices seems to be underestimating tightening supply globally, as well as in the U.S. After all, the run from the mid-$4.50 area to nearly $5.00 wasn't a coincidence. There were real concerns regarding the crop damage done due to undesirable weather in growing regions. In short, it is highly possible the market is pricing in the good news and has failed to price in the bad news.

We generally try to approach markets with a premium collection mentality. For instance, we explored the idea of selling put options using the December CBOT wheat options. We also considered constructing a covered call strategy (going long a December wheat futures contract and then selling a near-the-money call option). However, there wasn't enough premium to justify the risk of something going wrong. If the bottom falls out, we wouldn't be shocked to see what trade back into the $4.40 area....125 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.