Two days ago, August soybean oil gapped higher, hitting a 20-month high. This follows an announcement on June 13 by the U.S. Environmental Protection Agency (EPA) that it says is a major step forward to strengthen American energy security and support American farmers by proposing Renewable Fuel Standard (RFS) volume requirements for 2026 and 2027. This action represents a critical and much-needed step in the evolution of this 20-year-old program. The EPA’s “Set 2” proposal ensures the RFS program remains true to Congress’ original intent of increasing the use of homegrown American biofuels, unleashing American energy, and supporting rural economies. 

Consequently, soybean oil must find a high enough price to limit exports and provide for the expected increase  in soybean crush rates. Soybean oil open interest has risen 50,000 contracts in the last two days. Daily trading volume has spiked to an all-time high. The gap higher on the daily chart below is a bullish positive formation. 

The next chart is a monthly chart of soybean oil. You can see the trend going higher. This chart pattern is uncommon and, in my opinion, it points to higher soybean oil prices in the weeks ahead. Here is an at-the-money August soybean oil call spread. Buy the August 2025 soybean oil 55/58 call spread. The premium is 258 ($1548). This call spread costs approximately $700 at today's settlement. The maximum profit potential is $1800. These August soybean options expire July 25.

Get involved in this spread, prosper from the volatility that lies ahead, in my opinion, and enjoy the ride. 

Stephen Davis
Senior Market Strategist 
Walsh Trading

Direct 312 878-2391 8248 
Toll Free 800 556 9411
sdavis@walshtrading.com  
www.walshtrading.com

Use this link to join my email list: SIGN UP NOW

Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.

Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.