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Hey friends and loyal readers.  This will be a short and incomplete update as orders are still in process.  But I did want to leave an update on the status of the coffee market.  Tuesday Aug. 19 left me the final confirmation of an intermediate trend change via the MACD Histogram.  The %R and Relative Strength index have already flashed bullish divergence for a few days now and the MACD was the last to turn.  Despite the fact that Commercial Traders have not matched their net long positions of the previous few years, the above technical indicators and the fact that the coffee seasonality turns very bullish right about now has left me with enough conviction to enter the trade.  Even though my overarching philosophy of this trade is investment, I believe in the importance of technical indicators to enter and potentially exit the market.  Fundamentals dictate the magnitude, they just don’t dictate the when.

As of now I have 4 December 130 calls and 4 December 135 calls, each costing somewhere in the ballpark of 5 grand a piece, and each showing a loss of about a grand.  (Yes, for those math wizards this means I am down 8 thousand dollars on borrowed money within the first weak of putting the money to work…ouch.  That’s why I’m trading options, these declines are inevitable, and I’m still in the game.)  These contracts were not ideal, but I was having trouble getting into March and May and wanted to get my foot in the door.  I would have liked more time, but given a bounce I’ll look to sell the 135 calls at the very least and roll them into May contracts, in order to ride this market out.  I have 6 unfilled orders for May 170 calls costing around 2,500 a piece, assuming I can grab them at that price.

I’ll give a final update for this position when all is set or when changes are made.  Something I haven’t talked about yet with you all is that long dated options have a major downfall, namely that they are terribly illiquid.  It is very hard to get a quick fill like you might with a future.  It is difficult to get out of a failing position and difficult to get into what appears to be a winning one.  The best philosophy I can put forth is if it is difficult to buy, don’t, and if it is difficult to sell, don’t.  You don’t want to compete for a contract, it show’s you’re not buying weakness and selling strength.  The Tao of options trading in a sense.  Don’t struggle, be patient, and go with the flow.  See you soon, and hopefully out of the red.