Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Options Review 5-9-18
*As Coffee prices retreat, the average true range tends to shrink as well. Today’s 120-point range more than accentuated that thought. Options volume in Coffee was tamer than of late. The biggest trade in Coffee today was 2,000 lots that traded in Coffee options on the butterfly shown below. Paper bought it for some upside protection. Another trade in Coffee that was a non-event was the 750 lots that traded in the 1.60/1.70 call spread. Those two trades, which signify almost nothing in terms of powerful market sentiment, accounted for almost 30% of today’s Coffee options volume.
*Highlighted Trades Today:
375 Jul18 160.00/170.00 call spread traded .04.
100 Jul18 122.50 calls vs 119.25Δ35 traded 1.65. 21.06 IV.
500 Dec18 135.00/150.00/165.00 call fly vs sell 125.25Δ8 traded 1.23. Paper buys. 100 Jul18 115.00/112.50 put spread vs 118.90Δ10 traded .51. Paper sells.
150 Jun18 122.50/117.50 put spread traded 2.95 vs. 119.40.
100 Jul18 125.00/115.00 put spread vs 119.20Δ56 traded 5.95.
100 1-Month CSO Mar19 -2.30 put traded .30 vs. -2.35/-2.30.
750 Robusta 1-Month CSO Sep18 5 call traded 7 vs. -2/-1.
Today’s butterfly transaction prompts another discussion of potential butterflies that can be helpful depending on your market bias. For those who believe that Coffee’s lack of volatility will continue and that due to the nature of the spreads, each forward contract is likely to come down towards the level of the front month, the following butterfly might be of interest: KC Z18 120.00/115.00/110.00 Butterfly. It’s worth about 70-tics. If it trades anything like the May or July contracts, time works on the buyers’ side.
Cocoa and Wheat are the leaders in commodity market volatility. Cocoa’s 90-point range was below its average trading range, but, once again, it traded well beyond its break-even point and scalpers of Gamma remain content. If you’re trading Crude Oil, however, it certainly seems like that market is taking the prize. Tomorrow’s WASDE Report typically indicates substantial volatility, but, if you’re following Grain options, particularly Wheat and Soybeans, the implied volatility does not seem to be indicative of that.