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Options Update by the Numbers- Softs and Grains: End of Day Review

Sugar began the week with another 50-point plus move. It has consistently outperformed the decay of its options. Long option holders have been rewarded with ample opportunity to trade their Gamma in a profitable manner. Unfortunately, the Grains have followed a different trend, directionally, at least. They spent the entire session in negative territory, although they pared their losses quite nicely and settled far off their lows.

Monday is always a good day to look at options trading strategies to meet your market bias. If you have a long-term view, it is much easier to establish a position which meets your requirement and take advantage of the benefits that the implied volatility skew may provide. The number of variations is tremendous, but if you have an opinion, our execution team can assist you in providing a strategy that meets your requirements. One strategy we looked at today was buying out of the money call spreads and selling out of the money put spreads equidistant from the current trading level. Depending on the market, it can be a very interesting strategy.

Implied volatility in the Grains closed lower across the board. Soybeans’ implied volatility suffered the greatest magnitude loss. Wheat continued its path lower closing down about 1% on the day. RSI is weakest in Wheat, but only Soybeans remains above the 50% mark. Not one market exceeded their average trading range, yet all three breached their break-even points providing a good opportunity for some Gamma scalps. Otherwise, implied volatility traded in mostly a small range and one major impact on traders might have been the bid/ask spread (this is what makes execution so important). A good question to ask is how many points on an option is a 1% move in IV worth. The table below provides a look at the numbers including excellent volume in the Soft options. Have a good night.

Sugar Oct17 15.50/13.50 fence (to the call) vs 14.65Δ50 traded .10 500x 7:42 AM
Sugar Sep17 14.50/15.50 call spread vs 14.90Δ44 traded .44 250x 9:28 AM
Sugar Sep17 14.00/13.25 put spread vs sell 16.50 call traded .01 200x vs. 14.95 10:03 AM
Sugar Oct17 15.00/16.00 call spread vs 14.90Δ24 traded .33 100x 10:30 AM
Sugar Oct17 16.00/14.00 fence (to the put) vs 14.90Δ52 traded .02 200x 10:55 AM
Sugar Oct17 16.00 call traded 21 250x vs. 14.76 28.84 IV 10:57 AM
Sugar X17 15.00/Oct17 13.50 put spread vs +H18 15.51Δ34 sell V17 14.84Δ16 traded .31 500x 11:32 AM
Sugar Oct17 15.50/13.50 fence (to the call) vs 14.65Δ50 traded .10 200x 12:45 PM
Sugar Sep17 14.25 put traded .14 200x vs. 14.88 30.39 IV 12:50 PM

Coffee Oct17 135.00/130.00 put spread traded 1.15 100x vs. 138.95 9:30 AM
Coffee Dec17 135.00/145.00/160.00 call ladder (tree) traded 1.25 1000x vs. 138.70 10:19 AM
Coffee Dec17 150.00/165.00 (1x2) call spread traded 40 325x vs. 138.70 11:16 AM
Coffee Sep17 140.00/135.00 put spread vs 138.75Δ28 traded 2.30 100x 11:27 AM
Coffee Dec17 120.00 puts vs 142.50Δ8 traded .87 200x 25.03 IV 11:33 AM
Coffee Dec17 135.00/150.00 (1x2) call spread vs buy 142.00Δ10 traded .65 175x 12:58 PM
Coffee Oct17 135.00/130.00 put spread traded 1.15 100x 1:00 PM
Coffee Dec17 190.00/205.00 call spread traded .40 200x vs. 142.80 1:21 PM
Coffee Oct17 140.00/130.00 put spread vs 142.75Δ28 traded 3.05 100x 1:29 PM

Cocoa Sep17 2000/1900 put spread vs 2060Δ17 traded 10 300x 7:30 AM
Cocoa Sep17 2000/1900 put spread vs 2060Δ17 traded 10 1000x 9:49 AM
Cocoa Sep17 2100 conversion (to the call) traded 0 575x 11:57 AM
Cocoa Dec17 1900 puts vs 2100Δ22 traded 42 27.67 IV 500x 12:47 PM

Cotton Dec17 60.00 put traded .34 100x vs. 68.76 19.87 IV 7:57 AM
Cotton Mar18 65.00 put traded 2.08 625x vs. 68.56 18.42 IV 12:52 PM

*The Options Table below provides the approximate straddle price at the time of the update, its implied volatility, the break-even point that the underlying contract must move to make up for the decay of the options. It includes the end of day 20-Day historical volatility of the front month contract and the 9 and 14 Day relative strength index of the front month. It also provides information pertaining to the volatility of the futures and the change in implied volatility (make note that yesterday’s ATM strike, not shown, is compared to the current ATM strike. The price of the futures contract on the left of the table refers to all information pertaining to options valuation. The numbers at the right include the last trade in the futures contract. Feel free to contact me with any questions or to discuss strategy.

Fred Oltarsh
Options & Futures Execution, Strategy, Analysis and Risk Management
Main: 212-549-4100
Direct: 212-549-4114
Cell: 917-656-1767
ICE Chat: foltarsh1

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