Coffee Traders' Forum - A Discussion about Coffee Futures Trading


Coffee Traders Discussion Forum

Coffee Traders' Forum

Option Pricing: Gold, Dollar & Coffee

Based on previous posts, this author expect big moves in the dollar, gold, euro and bonds. While all are locked in step, Gold should move in the opposite direction of the other three. I do, however, think gold could take off. Given the potential for extreme movements and overnight risk, long cheap options not far out of the money make sense.

Question:

• At the money Dec calls in coffee are about $1,725 (No limit)
• At the money Dec calls in gold are about $2,000 (No limit)
• At the money Dec calls in the US Dollar Index are about $1,000 (No limit)

FROM A BANG FOR THE BUCK STANDPOINT, WHY ARE DOLLAR CALLS SO CHEAP COMPARED TO THE OTHERS? On a break, dollar options could be quite the trade, particularly if one was also long cheap gold options.