Wheat futures seem to be selling off on speculator positioning rather than fundamentals.
A lower US dollar and dicey weather haven't impacted the price of wheat in an expected manner. In fact, wheat has failed to find support on any headline, including more questions than answers in Ukraine and Russia. Nevertheless, the selling today appears to be overdone and could be the last price squeeze and sell-stop run before things turn around.
We acknowledge that holiday markets could lead to excessive trends, thus, it is important to leave room for error. We like using May bull call spreads with a naked put to pay for it (details below). This comes with unlimited risk positioned a dollar below current pricing but it is a low-cost way to get long wheat with attractive profit potential.
If you participated in the limited-risk wheat strategy suggested weeks ago (January vertical spread) we recommend buying the short call back and holding the long. Assuming margin and risk tolerance are available, we like the idea of adding this trade on top of the previous.
Alternative Strategy
Those looking for a simple and efficient strategy might simply opt to go long a mini futures contract (or full-sized for larger accounts), but doing so should assume 80 cents to a dollar of downside risk (of course, the risk is unlimited but the odds suggest there could be a floor near $7.00).
Alternatively, those looking for limited risk might simply buy the $8.00/$9.00 call spread for about 25 cents or $1250 or even the $9.00 call outright for 25 cents.