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

Monday’s holiday in London didn’t affect the volatility of the Soft commodities, in addition to Cotton. In the Soft commodities, Cocoa put in the most interesting day. Cocoa’s average trading range was almost 5% of the price of the underlying. Both Cocoa and Cotton exceeded their average trading ranges and their break-even points, as did Sugar. In a day with low options volume (there were a considerable number of block trades not shown because of the month they traded in), there was considerable movement. Even Coffee came close to trading beyond its average trading range. An interesting note is the differential between the December and March implied volatility in Cotton. While December is trading over March, the differential might be greater.

In the Grains, Wheat was the biggest loser, although Corn and Soybeans finished lower for the session. The disparity between the historical and implied volatility remains the greatest in Soybeans. This may be because every commodity on the board below (except for Cotton) has a lower average trading range now than it did at the beginning of the month.

Finally, the table directly below is a snapshot of the skews for each of the contracts followed below. The table shows the skew to the call and put side and how it progresses from the at the money. For example, the implied volatility of the March Sugar contract is .1% higher per strike as we progress farther out of the money on the call side. Eventually it progresses to .2% higher per strike. The numbers shown are all estimates but give you a look at the skews. In the Coffee contract on the put side, the implied volatility gets cheaper as you progress out of the money. If you have any questions, please let me know. Have a good night.

Sugar Dec17 16.00/13.00 fence (to the call) vs 14.73Δ38 traded .14 100x 10:11 AM

Sugar Oct17 14.00/15.00 call spread traded .14 100x vs. 14.18 11:014
Sugar Oct17 14.00/15.50 call spread traded .47 100x vs. 14.31 12:53 PM
Sugar Oct17 14.00 call traded .56 200x vs. 14.34 27.36 IV 12:55 PM
Sugar Oct17 14.00 put traded .23 150x vs. 14.33 27.88 IV 12:58 PM

Coffee Nov17/Oct17 135.00 call calendar 2.10 100x vs. 130.10 10:12 AM
Coffee Dec17 130.00/160.00 call spread vs 129.75Δ42 traded 5.20 250x 11:22 AM
Coffee Dec17 150.00/140.00 (2x1) call spread traded -.10 200x vs. 130.80 11:37 AM
Coffee Dec17 130.00 puts vs 130.90Δ46 traded 5.65 350x 25.26 IV 11:52 AM

Cocoa Mar18 2050 call traded 100 150x vs. 1961 26.57 8:18 AM
Cocoa Dec17 1850/1750 put spread traded 24 150x vs. 1976 9:23 AM
Cocoa Nov17 2100 call traded 35 150x vs. 1987 28.52 IV 11:01 AM
Cocoa Mar18 1650 put traded 21 500x 2000 26.20 IV 11:21 AM
Cocoa Dec17 2050/1850 fence (to the call) vs 1976Δ66 traded 26 250x vs. 1996 250x 11:42 AM

Cotton Dec17 70.00 calls vs 69.30Δ47 traded 2.18 300x 19.53 IV 8:53 AM
Cotton Dec17 70.00/67.00 put spread traded 1.45 150x vs. 69.21 8:29 AM
Cotton -Z7 67.00 puts, +Z7 62.00 puts, +Z7 72.00 calls - Sell Δ60 Dec17 69.60 traded .46 500x 11:53 AM
Cotton No. 2 Futures - NYCC - Nov17 75.00 call traded .50 500x vs. 69.66 19.53 IV 1:52 PM
Cotton No. 2 Futures - NYCC - Mar18 74.00 call traded 1.64 150x vs. 69.82 18.39 IV 2:15 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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