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 4-10-18

*After discussing low Sugar options volume yesterday, more than 7,000 options traded before 8:30 AM today and a total of more than 21,000 on the day. On the other hand, less than 4,000 Coffee options traded. As a hedging tool, Calendar Spread Options remain quite provocative. Today’s 20-point range in the May/July Arabica spread was much less interesting than the Robusta spread. The May Robusta futures had a 41-tic range today, while the May/July futures spread had an 18-tic range. Given the volatility in the spread, these CSOs are worth keeping an eye on. Today’s CSO activity is shown below and I’d be very curious if you thought the -2.00 puts were expensive or cheap.

*Highlighted Trades Today:
100 May18 122.50 calls vs 118.35Δ7 traded .17
100 Jul18 120.00/130.00 call spread vs 119.30Δ29 traded 2.47.
100 May18 117.50/115.00 put spread vs 117.50Δ38 traded .77.
250 1-Month CSO May18 -2.00 put traded .08 vs. -185/-180.
100 Robusta 1-Month CSO May18 -30/0 call spread traded 12 vs. -23/-22.

*Suggestions:
The roll continues to dominate Coffee trading. A range of 160-points has encouraged commodity traders to look for other markets to spend time on. This may reduce liquidity in the long run and provide for fewer participants should a short covering rally spook out some of the shorts. With implied volatility running at historically low levels, but well above historical volatility (see below), it probably isn’t time to hedge positions with long outright options. Spreads can reduce exposure to holding implied volatility and still provide an appropriate hedge. The key is finding the appropriate options strategy to meet your needs. We can definitely help. Feel free to call me and discuss it. The discussions I have provide some extra insight into your needs and provides me with a great opportunity to help design something tailor- made for you.

*Other Commodities:
Tariff talk, this time in a tame manner, led Stocks, Crude and Soybeans higher. At this stage, none of these products are close to having overbought RSIs. Contrarian traders will have to wait for a more significant move. Crude Oil is trading within a 130 of the year high.