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Coffee Futures Options Trade Entry 10: Options Expire Worthless

November 14th, 2008 · No Comments

Well, we’re a day past the expiration of my remaining 4 December $1.30 calls, and all went down worthless. Even though I lost approximately 20 grand on these particular beauties, they did serve some purpose over the last 3 weeks in helping me establish a longer term position in May contracts. They allowed me to write calls without fear of the market shooting higher and locking me into a loosing trade without completing the spread.


At present I have three spreads for May 09 Coffee.
Short 1 $1.15 call and long 3 $1.40 calls
Short 2 $1.20 calls and long 4 $1.40 calls.

I was also able to trade out of 4 of my 6 initial May $1.70 calls and put some of that equity toward an additional May 09 $1.40 call giving me a ratio of Short 3 calls around $1.20 to Long 8 at $1.40. This, assuming the market turns up in the next few months will give me a net long position of five contracts somewhere in the $1.50 range, and a net liability of 3 contracts should futures prices settle in the $1.15 to $1.40 range.


As such, I believe I’ve taken on enough risk with these spreads, and will try to work the remaining $1.70 calls into a better position. For example, on a bounce to $1.25 or so, I may sell both of those and perhaps one of the $1.40 calls to use on a chance pullback to buy back some of my short puts. The overall trend in this market is still down and as such demands respect on the downside. But I do believe we’ve seen the bottom already at $1.05, and that this market is in the process of establishing a base. Furthermore, if I had to place an intermediate term bottom on the Dow, I’d bet on today’s reversal in prices accompanied by both MACD Histogram and RSI bullish divergence.

Tags: Commodities · Current Trades

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