Coffee Traders' Forum - A Discussion about Coffee Futures Trading


Coffee Traders Discussion Forum

Coffee Traders' Forum

Nugent/Oltarsh Options Review *PIC*

Options Review End of Day 4-5-18

*Despite an early morning rally, Coffee was dominated by the switch market. Calendar Spread Options traded in both Arabica and Robusta. Volume in the May/July spread was not as good as yesterday, but more than 16,000 spreads traded in May/July and there are plenty of contracts left to roll. For the first time in a very long time, the average true range in Coffee fell below 2.00. If you haven’t been completely aware of Coffee’s lack of volatility, this statistic really makes the point. Although May/July only had a 15- tic range, there are 6-trading days left in the May/July Calendar Spread Options.

*Highlighted Trades Today:
200 - Z18 115.00 puts, + Z18 105.00 puts, Buy Dec18 135.00 calls - Sell Δ50 Dec18 125.50 traded 3.35. 150 May18 117.50/120.00/125.00 call fly traded .32 vs. 117.90.
100 Jun18 127.50/115.00 fence (to the put) vs 119.90Δ44 traded .05.
100 1-Month CSO May18 -2.25 put traded .04 vs. -1.95/-1.90.
100 Robusta 1-Month CSO May18 -10 call traded 10 vs. -12/-11. 100 Robusta 1-Month CSO May18 -20 put traded 8 vs. -8/-7. 250 Robusta 1-Month CSO May18 -30 put traded 6 vs. -10/-9. 100 Robusta 1-Month CSO May18 0 call traded 8 vs. -10/-9.

*Suggestions:
As discussed almost everywhere yesterday, there is a lot of time for the tariff agreements to be negotiated. Grains and stocks continued to adjust to yesterday’s news. The effect on Coffee, unfortunately for volatility traders, is null. Today’s 140-point range is indicative of that.
*Other Commodities:
Cocoa remained the most volatile commodity in the Softs and Grains. Its 4%, 101-point range, made yesterday’s 2-day straddle of 61-points seem cheap, in hindsight. Today at 11:49 AM, the May 2500 Straddle traded 60-points with May futures trading 2507. Will Cocoa prove to be as volatile tomorrow? In addition to the interest in Cocoa, the Robusta spreads remain quite interesting. The flow of paper in their CSOs, had been a precursor to their move out. Today’s 9-point range in the May/July shows the volatility of the spread. The -10 May/July straddle traded synthetically today for 21 tics. If you’re intrigued by the CSO markets, give me a call to discuss them. Calendar Spread Options are ideally suited to mitigating exposure in the spread markets.