Coffee Traders' Forum - A Discussion about Coffee Futures Trading

Coffee Traders Discussion Forum

Coffee Traders' Forum

Market *PIC*

Around 725 lots traded for the first five minutes of trading in a range of 30 points. At this very moment (6:34) 465 lots got hit to make a new low of 119.35. The selling could be a parallel to the bearish sentiment that is becoming more popular in the forum or it could be residual selling from Friday’s options expiration. We saw that only a few of the 120.00 puts were exercised and possibly more were needed to satisfy any hedging that took place below the strike. The depth of market on the buy side did slim down but as we see there are plenty of buyers in May, both shown and in the form of icebergs, as well as very good scattered buying in the forwards extending to May19. The sell side of the market is by no means as populated as the buy side but we know that continuous new selling will prevail later in the morning. There may be pockets of longs getting stopped out but there is lots of buying to absorb it. There is good reason to believe that the market will continue lower but all I see is a market restricted in a narrow range. RC is staying in line with KC as the arb is 39.46. Spreads are quiet in both markets. USDBRL is unchanged at 3.2548 and the COP is up 1.00 at 2866.80. All the major currencies are higher against the $ except for the € rendering an unchanged DX. Bonds have quietly creeped up since the last session but the metals got hit this morning and are lower. Oil is lower and equities are up. Sugar is unchanged, cotton is lower and cocoa is higher.

All theories about options are valid but what I see for the most part day in and day out is market makers as options writers while commercial and specs buy from them. In my opinion, commercials tend to be long both calls and puts which Is why we see their net long positions increase on weakness and decrease on strength. Of course, it makes sense for commercials to sell puts but this activity is not evident in their hedges, nor would it likely be. A good deal of the buying in forwards I attribute to the consumer end and any selling by producers often takes place in the forwards as well.