Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
Options Review 5-16-18
*Once again, Coffee did almost nothing. Its range of 70-tics was, once again, less than its average true range. In fact, it was the smallest range in a year. Coffee options volume remained quite good with almost 13,000 lots trading. Some of that was due to call buying for frost protection. Although at the money September implied volatility is less than 20%, frost protection, as in the September 170 calls for 45-tics is no bargain in terms of implied volatility (40.71). You basically have to look at the absolute cost of protection. In addition, the September 250 calls traded 10-tics and the 300 calls traded 5-points. There was also some activity in the August 200 calls. July out of the money calls traded as well, see below. In addition to that type of bullish trading, call fences traded as well. Personally, I think there is better value than fences for getting long. Call me for a discussion on that matter. If you’re not getting the data in the table below, you’re not getting the email. Contact me to get on the list.
*Highlighted Trades Today:
175 Jul18 125.00/130.00 call spread vs 117.20Δ6 traded .26. Paper buys.
100 Jul18 125.00 calls vs 117.45Δ10 traded .50 22.23 IV.
200 Buy Sep18 115.00 puts - Sell Dec18 150.00 calls traded .18 vs. 119.40 in U18.
100 Jul18 120.00 calls vs 117.25Δ30 traded 1.21 18.98 IV. Paper sells.
850 Dec18 115.00/107.50 (1x2) put spread traded 1.07 vs. 122.85. Paper buys.
100 Jul18 125.00/120.00 (2x1) call spread traded -.35 vs. vs. 117.00.
900 Jul18 140.00 call traded .09/.10 vs. around 117.25. Paper buys.
500 Jul18 137.50 call traded .11 vs. 117.25. Paper buys
350 Dec18 140.00/112.50 fence (to the call) vs 123.00Δ44 traded 1.05/110. Paper buys. 250 Sep18 135.00/112.50 fence (to the call) vs 119.50Δ36 traded .25.
Coffee’s complete lack of movement makes it impossible to generate strategies for speculators, however, there is a significant amount of hedging that is being absorbed by the markets in terms of differing options strategies. Call spreads, puts spreads and fences have all been supporting volume and providing excellent hedging opportunities. There are a multitude of choices; finding what suits your needs is our challenge.
Even when you think Cocoa may become a little less volatile, it still trades in a significant range. Although it was unable to breach its break-even point on the downside this morning, it once again exceeded it on one side of the market. In the Grains, Soybeans is testing the 10.00 level. Most other markets traded in minimal ranges.