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Nugent/Oltarsh Options Review *PIC*

Options Review 5-8-18

*London was back in action on Tuesday and yesterday’s downfall continued. Options volume continued to be robust. Today it was greater than 13,000 contracts. The range of 225-points was once again greater than the average true range, but last week’s volume, volatility and some people’s belief in higher prices, proved to be short-lived. There was some trading in Calendar Spread Options with the Robusta 10 calls trading first, at a very expensive, 15-points. That made the straddle 32-tics, which, given what has traded in the past, and the volatility of the spreads, seems very high. Ultimately, the straddle traded 4-tics lower in no time. As is often the case with the 5-second cross rule, a better price can have been located. On an option that has a small delta, or is laid up, there should be a considerably longer window for a cross. Finally, the option with the largest volume in KC today was the July 100 put which has traded between 2-5 tics 1250x. Does someone know something?

*Highlighted Trades Today:
250 Aug18 135.00/150.00/165.00 call fly vs sell 123.00Δ10 traded .68. 150 Sep18 190.00 call traded .41 vs. 123.00. Paper buys.
100 Jul18 125.00/115.00 fence (to the call) vs 120.50Δ44 traded .78. 100 Sep18 125.00/115.00 put spread vs 123.00Δ32 traded 5.02.
150 Dec18 120.00/110.00 (1x2) put spread vs buy 126.50Δ8 traded 1.87. Paper sells. 150 Jul18 120.00/130.00 call spread vs 121.50Δ40 traded 2.70. Paper sells.
250 250 Jul18 142.50 call traded .34. Paper buys.
200 Sep18 145.00/115.00 fence (to the put) traded .10 vs. 123.20. Paper buys.
125 Sep18 112.50 put traded 1.12 18.50 IV.
500 Robusta 1-Month CSO Jul18 10 call traded 15 vs. 7/8. 200 Robusta 1-Month CSO Jul18 10 call traded 13 vs. 7/8.

Since the majority of the shorts are not ready to cover, the market may remain in its comparatively narrow range. Butterflies are good for that. It’s the patient trader’s method of having a limited-risk volatility position that can work in your favor over time.

*Other Commodities:
Cocoa, once again, exceeded its break-even point. It remains an extremely interesting market for comparing historical and implied volatility. Options volume the last couple of days, surprisingly, has been the largest in Cotton and Coffee, with Sugar, today particularly, on hiatus. For traders of Crude Oil, with the Iran news pending, it was a very volatile market. The average true range of about 160-points was eclipsed by today’s 272-point range.