Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Options Review End of Day 3-6-18
*Following yesterday’s tremendous volume in Cocoa, Cotton followed up with a very successful day of its own. Yesterday’s 16,000 lots in Cocoa was eclipsed by Cotton options today. Unfortunately, Coffee didn’t participate in any of the excitement. Today’s 190-point range continued to prove that Coffee is incredibly uninteresting. The highlights below indicate the lack of interest. The biggest trade of the day, as seen below, was the 2-month CSO in Arabica. A bullish Robusta July/September CSO fence also traded. That structure has traded for the last two days and is an indication that the buyers think the spread will keep moving positive. Sadly, while the Robusta CSOs traded 600 contracts, the outrights traded only 620. Unfortunately, options activity in both Arabica and Robusta is stymied by limited participants. As you can see, that doesn’t last forever, in the last two days, Cocoa and then Cotton have taken it to a much higher level.
*Highlighted Trades Today:
250 Jul18 140.00/150.00 call spread traded .70 vs. 123.20.
200 Sep18 110.00/100.00 put spread traded .90 vs. 125.50.
200 Coffee "C" Futures - NYCC - Jul18 117.50 puts vs 123.25Δ30 traded 2.42 350 2-Month CSO May18 -4.50 put traded .16 vs. -4.50/-4.45.
300 Robusta 1-Month CSO Jul18 0/-5 fence (to the call) traded 4 vs. -1.
While it is certainly possible to pick your spots when owning a straddle, it’s not easy. Yesterday, the May 120 straddle traded 2.50. Today on the rally, you could sell it for 2.80. Towards the end of the day it was quoted 2.32/2.39.
With numerous markets with RSIs near 70 and up, the question is how long can this last? Cocoa, Soybean and Corn are the leaders (Cotton came down from its lofty position today). There is clearly significant speculative commodity buying in those markets. Grain prices will most likely be affected by Thursday’s WASDE Report. You can be certain that implied volatility after the report will be in. Options trading can be particularly interesting before the report providing multiple opportunities to build an options position that meets your risk reward bias.