Friday, if you can remember that far back, was highlighted by another bounce in the S&P. For traders with a directional opinion on Stocks, the S&P options provide numerous opportunities to put on interesting positions using the Implied Volatility Skew. Previous articles have discussed how the skew can be used to your advantage whether you want to get long or short. Whether it’s trading fences or put spreads versus call spreads, the S&P has an excellent strategy for any market bias.
Friday’s Coffee Market also extended its gains. Coffee, Cotton, Corn and Sugar are all in the midst of excellent rallies. Coffee and Corn have a similar Options Skew and similar strategies can be considered. Coffee, as you can see below, is the only one with a Historical Volatility near the Implied. That doesn’t mean that there isn’t a relatively flat volatility trade waiting in all of the markets.
The Chart below highlights Friday’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. Depending on your market bias, I have options trading suggestions which, due to the nature of the options skew, might mesh nicely with your trading opinions.
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. A number 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.
FUTURES AND OPTIONS TRADING INVOLVES SIGNIFICANT RISK AND IS NOT SUITABLE FOR EVERY INVESTOR. INFORMATION IS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT IS IN NO WAY GUARANTEED. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS.
