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Option Activity *PIC*

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

Sugar worked its way back to the 13.92 low after last week’s abrupt one-minute sell-off. It’s still unclear what caused that sell-off, but apparently, it wasn’t unwarranted. That said, after making lows of 13.79, Sugar recovered to trade at 14.00-cents before settling at 13.87. In the meantime, the Grains traded about 1.0/1.5% higher and Wheat, which had been the weakest market most of the day, closed with the greatest percentage gains. The table below highlights the lethargic activity of the day. Implied volatility was mostly unchanged across the board and it was clearly not the day to be long volatility. I received some questions today about the sample strategy that I presented on Friday. For those who missed it, or didn’t get a chance to review it, I’ve shown it again.

The table below is an example of a hedge, or short trade, in the E-mini S&P. The analysis behind the trade is worth some discussion. In the example below, one buys a 2430/2400 put spread and sells a 2510/2540 call spread. Although the call spreads and the put spreads are equidistant from the current trading price of the futures, the strategy generates a 6.38 credit. The risk/reward of the transaction is excellent. You risk 23.63 to make 36.38 using the mid-points of the bid/asks. Feel free to call me to discuss this type of position and strategy opportunities in other markets.

Today’s highlighted trades are as follows:

Sugar Oct17 16.00/17.00 call spread traded .06 2000x vs. 13.99 9:21 AM
Sugar Oct17 14.00 puts vs 14.00Δ48 traded .58 1000x 30.58 IV 11:14 AM
Sugar Buy Sep17 13.50 puts - Sell Oct17 12.50 puts traded flat 100x 12:20 PM
Sugar Mar18 15.00/16.00/17.00 call fly traded .12 150x 12:59 PM

Coffee Dec17 120.00 put traded .69 150x vs. 145.20 26.28 8:30 AM
Coffee Dec17 150.00/200.00 call spread vs 145.00Δ38 traded 5.96 1000x 8:53 AM
Coffee Sep17 140.00/145.00/150.00 call fly vs sell 142.00Δ18 traded 1.36 150x 9:03 AM
Coffee Sep17 150.00/155.00 call spread traded .22 175x vs. 141.75 9:27 AM
Coffee Sep17 140.00 call traded 3.25 100x vs. 26.01 IV 142.05 10:33 AM
Coffee Dec17 175.00 calls vs 145.50Δ15 traded 1.87 100x 11:08 AM
Coffee Dec17 142.50/135.00 put spread vs 145.60Δ15 traded 3.23 500x 12:06 PM
Coffee Dec17 145.00/125.00 fence (to the call) vs 146.00Δ66 traded 7.75 150x 12:09 PM
Coffee Oct17 135.00/130.00 put spread vs 145.80Δ9 traded .70 400x 1:16 PM
Coffee Oct17 140.00/155.00 call spread vs 145.80Δ44 traded 6.11 200x 1:27 PM

Cocoa Dec17 1900 calls vs 2045Δ72 traded 197 250x 27.67 IV 10:22 AM

Cotton Mar18 85.00 call traded .43 vs. 70.49 19.22 IV 10:33 AM
Cotton Dec18 74.00 calls vs 69.90Δ40 traded 3.30 1000x 11:28 AM

*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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Option Activity *PIC*
Option Activity *NM* *PIC*
Closing Volatility KC RC