Coffee Traders' Forum - A Discussion about Coffee Futures Trading

Coffee Traders Discussion Forum

Coffee Traders' Forum

Nugent/Oltarsh Options Report *PIC*

End of Day 1-8-16

*With Coffee options implied volatility trading near historical volatility levels, a greater than 400-point move down in the underlying provided plenty of opportunity for strangle and straddle holders to make a profit. Despite today’s volatility, options volume was moderate and there were relatively few large trades. Today’s settlement of the at the money straddle for February shows just how short-term options pricing can be. The February 125 straddle settled around 315 points. Overall Softs volume was quite good as Sugar options put in a banner day and Cotton, with the block trades described below, had good volume as well.

*On the Day:

Feb18 125.00 calls vs 126.20Δ60 traded 2.26 245x 22.36 IV. They also traded 2.30 125x. An aggressive seller on a volatile day.

Late in the day the Coffee Jul18 100.00/110.00/160.00/170.00 iron condor traded 1.08 700x which boosted the Coffee volume over 10,000 lots. What began as a disappointing volume day, proved volatile and active. Hopefully, the week will continue in that manner.

In Cocoa, the Mar18 1900/1800 put spread vs 1884Δ30 traded 41 2500x with paper selling. Cotton had 4000 lots of block trades including 2000 of the March 87 calls and 1000 each of the March 69 and 74 puts. In the July contract 1000 three-ways traded. In addition, more than 6500 lots of December Cotton options traded on the day.


None of the commodities shown below, with their options information, have the implied volatility straying too far from its historical volatility. Cotton has the largest disparity, but it is not traditionally significant. For those looking to establish a position due to a market bias, using the skew and a particular ratio spread may be worthwhile. A few weeks back we discussed the May 90/95 1x2 Cotton Call Spread. It’s a position that despite a price increase in Cotton, has provided some marks in our favor. We’re here to assist you with designing a position that meets your hedging or speculative needs.

*Other Commodities

Crude Oil and the E-mini S&P put in a relatively uneventful day. Despite their lengthy ascent, it’s been difficult to make money being long volatility. On the other hand, directional trades like fences or ratio spreads have proved to provide the best opportunities. The liquidity of both markets is excellent.

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.