Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Options Review 5-15-18
*Despite another down day in Coffee, options volume lightened up from yesterday’s level, but was still impressive. August puts were the least expensive options on the board and provided an excellent way to purchase some downside protection. Unfortunately, another small range (160-points) went a long way towards creating a continued lack of interest. Supply concerns weigh on the market and long-term shorts continue to enjoy the benefits of an expected glut of Coffee. That said, Coffee still has greater potential for a rapid movement to the upside than the down, but the days of aggressive movement seem far removed. The biggest trades of the day were call and puts spreads and, as is often the case, generalizing a market direction from the trading of the options, is impossible.
*Highlighted Trades Today:
125 Sep18 115.00 put traded 2.23 vs. 119.55 17.73 IV.
100 Sep18 125.00/120.00 put spread vs 119.25Δ14 traded 3.55.
100 Aug18 115.00 puts vs 119.25Δ28 traded 1.47 16.52 IV.
125 Jul18 120.00/115.00 put spread vs 117.00Δ36 traded 2.85. Paper sells. 100 Jul18 130.00/150.00 call spread traded .15. Paper sells.
150 Jul18 120.00/125.00 call spread traded .70 vs. 116.65. Paper buys. 100 Sep18 112.50 put traded 1.43 vs. 118.90 16.63 IV. Paper sold.
250 Sep18 125.00 calls vs 119.10Δ34 traded 2.84 21.86 IV.
200 Dec18 160.00 calls vs 122.60Δ13 trade 1.60 30.67 IV. Paper bought. 200 Dec18 135.00 calls vs 122.60Δ31 traded 3.82 23.86 IV.
150 Jul18 120.00/125.00/130.00 call fly vs sell 116.50Δ12 traded .48.
300 Dec18 150.00/110.00 strangle traded 3.75 vs. 122.80
Today’s range did little to encourage options buying, however, the market continues to move and patience provides opportunity. We looked at the August 112.50 puts for around 80 tics. Its implied volatility was less than 16.50%. It’s one of the cheapest options on the board and given where we are trading, it is some inexpensive downside protection.
Gold finally crashed through the $1300 level as the Dollar continued its ascent. Its $24 range was the largest since April 11th when it traded at its year high. Gold remains a commodity lacking in volatility. Cocoa, on the other hand, had a 109-point range in the July contract and continued its violent moves despite its options trading at substantially below historical levels. On expiration day in Sugar, the 14-point at the money straddle discussed last night traded out to 20-tics intrinsically. Unfortunately, despite the movement, if you didn’t kick out futures on the rally, it was tough to make money on the one-day straddle.