Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Options Review 5-4-18
*For the most part, this weeks’ reduction in net spec shorts in Coffee, on both the Arabica and Robusta COT Reports, should be indicative of the market’s early rally. The decrease in the Robusta shorts, as a percentage of open positions, should be substantially larger than Arabica’s. Unfortunately, the early gains were given up today and for the week, Coffee was about unchanged. Despite a wider range than the average true range, options volume today was the slower than the last few days.
*Highlighted Trades Today:
150 May19 127.50 puts vs 135.15Δ36 traded 7.62 21.76 IV. 200 Dec18 110.00 puts vs 129.40Δ12 traded 1.23 20.46 IV.
125 Jul18 120.00/115.00 put spread vs 123.50Δ22 traded 1.22. 100 Sep18 122.50/135.00 (1x2) call spread traded .45 vs.
400 Sep18 150.00/175.00 call spread vs 125.00Δ10 traded .96.
200 Sep18 135.00 calls vs 125.40Δ32 traded 3.45 26.77 IV. Paper buys. 275 Jul18 125.00 calls vs 122.75Δ40 traded 2.43 22.04 IV.
As the market consolidates around the 122.50 level, right around last Friday’s settlement price, the June options, with a week to trade, provide plenty of Gamma for those who expect a continuation in the increase in market volatility. This week had a range of 4.70-points. At the opening on Monday, you’ll see just how cheap they are. One thing to note, because they are June options and not July, the open interest is smaller and the liquidity will probably not be as great because it is a serial month.
The one-day at the money straddle in Cocoa, which traded at 46-points near yesterday’s close, was worth 85- tics intrinsically on the lows. The options continue to be a give away based on the movement of the underlying market. Expiring options, should there be liquidity, provide significant bang for the buck. Often times, the best way to liquidate them is to offset a deep option with the futures contract.