July Corn Rising?

On the chart see the 5/8/20 comment. July corn has been bottoming for a couple weeks. Finally, it looks like its breaking out to the upside today. Here's what I see:

• Double bottom.
• Little rounded bottom.
• Bullish engulfing last 2 days.
• Close slightly above 8ema yesterday.
• Close above the 8ema today.
• Break through the downward trend line.

We were looking better before the rejection off the 20sma, but we did close above the 8ema. We may get a little bobble between the 8ema on the bottom and the 20sma above but the odds favor breaking through to the upside. I say that because of the reasons listed above, but also:

• The thick white angled line segments show a possible 3 drive to a bottom pattern.
• The thick yellow angled line segments show a smaller possible 3 drive to a bottom pattern.
• The thick purple angled line segments show a possible AB/CD pattern.
• Soybeans, Soybean Oil, Soybean Meal, and Wheat all look bullish as well.
• There's a Positive Stochastics Divergence on July weekly corn over the previous 2 candles.

Due to the choppy nature of some Ag futures lately, and other concerns, such as tensions with China lately that could effect the grains market, as well as not proving we can break through the 20sma yet, I decided to go with the defined risk of an option rather than the futures, at least to begin with.

Got a July 340 Call option with a 30% Delta for 5 1/2 * $50/pt = $275.

The target is the 50% Fib shown on the chart. Its 356 3/4. I entered a conditional order to sell the option when the futures hit 356 1/4. I like to shade targets by 2 ticks to account for the Bid/Ask spread and also sometimes targets are missed by a couple ticks.

Assuming we lose the whole value of the option, the Risk is $275.

The reward is 356 1/4 - 322 1/4 (where futures were when I got the option) = 34 * $50/pt * 60% Delta (at target) = $1020. The Delta is 30% now but if we hit our target at 356 1/4 it'll be about 88%. If we use a simple average (30+88)/2=59.

I got the 88% by looking at the Delta for a 320 (ATM when I looked) - 34 = 286 Call. There isn't a 286 Call so I used a 285 Call. A July 285 Call today, with July Corn at 320, is 34 points in the money. That's where we'll be if we hit our target.

Using a simple average is an approximation because the price curve of an option is non-linear. Also, using the 88% Delta for an option today is an approximation because we'll have a higher Gamma when we hit our target due to a shorter time to expiration.

So, bottom line for the Risk:Reward is 275:1020 = 1:3.7, which is great.