Today’s futures movement was relatively tame with the S&P featuring the most interesting move. As discussed Friday, if you have a directional trading bias and want to establish an options position, I would recommend a vega neutral spread rather than an outright purchase. Implied Volatility trading will be more challenging than usual in the next several days due to the long weekend and end of summer holidays. By establishing a vega neutral options position, through spread transactions, if you are directionally correct, you won’t have to worry too much about the affects of Implied Volatility changes. Cotton continued its upward movement with a small rally but as you can see from the Relative Strength Index, it may be a bit overbought. Also, make note of the Implied Volatility difference between October and December Wheat. The October 7.10 Calls settled at almost 52% volatility while the December 7.10 Calls settled at almost 43.50% Volatility. This presents an intriguing spread for those accustomed to trading Wheat Options.  Lastly, don’t ignore the October/January Crude Oil Spread which has exploded from 154 on August 2nd to 343 today. There are clearly many things to look at in today’s Options and Futures contracts.  The Chart below highlights Monday’s essential information.

Each day I review the information provided below and analyze the options settlements to help determine the appropriate strategies for establishing positions. A risk/reward analysis should always be considered before initiating positions. I can be reached at 212-383-9453 or at fred.oltarsh@libanman.com for a no obligation discussion about position ideas. If you’re trading the S&P, Coffee or Crude Oil, I have options trading suggestions which might mesh nicely with your trading opinions. The Wheat and Crude Oil markets provide particularly interesting opportunities. I look forward to the opportunity to discuss them with you.  

The chart represents some useful information pertaining to tonight’s settlement prices. Most of the columns are self explanatory but hereis the key to the lesser known columns: RSI is the Relative Strength Index and measures a market’s overbought or oversold status. Anumber greater than 70-80 would be considered potentially overbought while a number below 30-20 might be considered oversold. The  10 and 30 HV are the 10 and 30 day Historical Volatility for the Commodity. IV refers to the Implied Volatility of the At-The-Money Option. The ATR and $-ATR refers to the 20-day Average Trading Range of the Futures Contract and the Dollar Range for the Contract . Much of this information is a simple way of analyzing Implied and Historical Volatility and is a concise review of the markets.For help interpreting the numbers or understanding how this type of analysis will help your trading call us at 212-383-9453.