Coffee Traders' Forum - A Discussion about Coffee Futures Trading


Coffee Traders Discussion Forum

Coffee Traders' Forum

Nugent/Oltarsh Options Report *PIC*

End of Day 1-3-18
*Despite trading to the upside after early losses, Coffee hit a 300-point skid on 2,000 lots of selling in one minute and dealt a slight jolt to the recent longs. Last night’s RSI was over 70 and that may have been a small part of today’s sell-off. Two thousand lots of selling in a minute is quite another. Options volume in the softs as a whole was excellent. This was despite a small range in Sugar. Coffee options volume was strong, although there weren’t any significant trades that would be indicative of a strong market sentiment.

*On the Day:
Early morning trades included: Buy Mar18 130.00 calls - Sell Mar18 140.00 calls - Sell Jul18 160.00 calls which went 28 tics 125 times. It was a relatively strange inter-month Call Tree that the locals bought.
In addition, the Mar18 127.50/120.00 put spread vs 129.65Δ26traded 2.47 1000x with locals selling.
Also, May18 122.50 puts vs 132.00Δ25 225x 200 traded 2.50 with paper selling, 22.89 IV.
Mar18 120.00 calls vs 129.85Δ84 traded 10.70 150x 24.96 IV.
In the Coffee 1-Month CSO Mar18 -2.20 call traded .08 250x vs. -2.30 in the spread. The CSOs provide an excellent opportunity to hedge spread risk or speculate on the directional movement of spreads. They’re just like regular options and the spread price is usually quite narrow. Today’s 20-point range showed how inexpensive the options can be.

*Suggestions:
The large Coffee sell-off in a one-minute span provided some interesting opportunities to get involved in the rally. It may also have spooked many new comers to the market. In options, there are a multitude of reasonable ways to get long the market with good value and limited risk. In a suggestion that we have provided many times, we encourage purchasing call spreads and selling put spreads for those that are interesting in getting long in anticipation of further liquidation of short positions.

*Other Commodities
For those that say volatility is dead, they shouldn’t be looking at the stock market or soft commodities. Front month Natural Gas implied volatility is well in excess of 50% and the frost continues across much of the country. The implied volatility is actually quite a bit lower than the recent historical volatility. There’s always an interesting market to analyze.
The Table below shows approximate prices of straddles and implied volatility at the close of Coffee Futures today. It also provides Relative Strength, Average Trading Range and Historical Volatility as well as the Break-Even Point of the monthly options contracts and a review of daily trading information. A comparison between historical and implied volatility can provide valuable information as to the options relative value. In addition, RSI can be indicative of overbought and oversold markets. Data is provided by feed which may not always be accurate. Please call with any questions or discussion points.