I'm putting together a strategy that I really believe in, based on the correlations between cotton and soybeans. The idea is to take advantage of the imbalances we're likely to see in these markets as the U.S. presidential election approaches. My main position: Short Cotton (March 2025 futures contracts): I'm clearly bearish on cotton. With the surplus in stock and the global demand decreasing, especially due to trade tensions and a looming recession, I don’t see how cotton could significantly rebound in the short term. My goal is to capitalize on this downtrend by shorting March 2025 futures contracts. Selling Cotton Call Options Strategy: In addition, I’m selling call options strategy. I want to capture a nice premium, especially with the expected volatility around the election. The 75 strike gives me reasonable protection against a moderate price rise, while maximizing my gains if the market stays flat or falls. So Sell the CTH25 C75 Buy 2x CTN25 C80 Sell CTV25 C75. I used to do this strat when I had a view in my former job What I’m doing alongside that: Long Soybeans (spread between January 2025 and May 2025): To balance my short position on cotton, I’m going long on soybeans. Why? Because I believe the soybean market has a good chance to rebound after the elections, especially if trade tensions ease. I’m playing a spread between January 2025 and May 2025, anticipating a tightening of the price gap in the short term. This allows me to benefit from a possible market recovery without too much exposure. Why I believe in this strategy: The correlation between cotton and soybeans is relatively low, allowing me to diversify my risk. On one hand, I’m betting on a drop in cotton due to structural factors (high stock levels, weakened demand). On the other, I’m taking advantage of the potential rebound in soybeans, especially if exports pick up post-election. Selling call options on cotton adds an extra layer of safety. Even if the market doesn’t collapse, I’m still capturing solid premiums, which boost my overall returns. Meanwhile, my long position on soybeans provides a hedge against potential market fluctuations. To me, this combination makes sense in a context where the uncertainties around the U.S. election are clearly going to impact these markets. I’m convinced this approach is solid. It allows me to play both the cotton volatility and the potential soybean recovery, while managing risk effectively. What do you think? Please let me know ! Michael Delattre
i think that perfectly sane and rational thinking will fail in the markets every single time. that's something you can depend on.