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At 09:24 PM 2/2/98 -0500, you wrote:
>May Bellies had a reversal day today off the expected target
>price for the end of the a-b-c correction.
>Look for at least a test of contract lows
>Attachment Converted: "c:\eudora\attach\pb8k.gif"
>
Alan and RT'ers,
Based on the chart that Alan sent earlier tonight, I noticed a
symmetrical wave relationship that would concur with Alan's analysis of a
continued decline.
If you take a look at Alan's chart, you will notice, based upon visual
inspection, this market had approximately a 7 point rally which occurred in
October 1997. This rally could be considered a Wave 1-2. After the wave 2
high, the market declines to its recent low in January '98 and then
"appears" to rally approximately 7 points, again. This rally, in a
downtrend symmetrically matches wave 1-2 and would suggest that this market
should continue lower.
Hope this helps,
John Boggio
Attachment Converted: "c:\eudora\attach\pb8k1.gif"
For recent commentary and more informations regarding SymWave, please go to:
Commentary: http://www.realtraders.com/boggio/disc7_toc.htm
Info regarding SymWave: http://www.realtraders.com/boggio/boggiobio.htm
Thank you.From ???@??? Mon Feb 02 09:51:57 1998
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Date: Mon, 02 Feb 1998 12:04:24 -0500
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From: Walt Downs <knight@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: Re: Fut: Sugar etc
References: <199802021709.KAA22432@xxxxxxxxxxxx>
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Status:
BrentinUtahsDixie wrote:
>
> Walt,
> I can't measure the volatility of Sugar puts and calls but if they are
> anything like the Commodity itself they can't be low. I would think that
> like most markets, that after the plunge stops there will be a sideways
> move for a while. Quite a while if history is an indication and this El
> Nino seems to be highly over rated.
>
> Regards,
> Brent
Brent,
Against historical data, the options are cheap. However, in a way you
are right. The volatility of the option is usually relative to the
market (although not always. :) ). In this case, looking at what Sugar
has done over the last year or so, I would agree with you.
But, here are the things I am looking at:
1. The El Nino year was not overated. Coffee, Cocoa, Cotton and OJ
have all enjoyed nice moves. (Although OJ was only recently.).
2. Of the tropicals, Sugar was the only one that did not have a
substantial and sharp move, on a percentage basis. When a market starts
looking like it is never going to move again, and most traders have
lost interest, that is usually the time to start watching the
commodity much more closely. (OJ was a good example of this.)
Let's take a look at the trade I was talking about:
You buy an ATM call and put for $550.00 each. You have 1 year to
expiration, and the vol is low enough, that the options will retain
their value well. Market at 11.00
You now have 12 months for Sugar to trade to over/under 11.50 or 10.50,
at which point, you should start seeing your first opportunites to
either leg out of the profitable side of the spread, or turn the
profitable side into a "free trade" by selling higher options against
it.
It's like sitting at a poker table, holding a pair of aces. By
themselves, not necessarily a winning hand, but, what if some one
told you that you could sit at the table and draw cards for a year.
Your chances of drawing the 3rd and even 4th Ace seem reasonable.
Like anything though, you have to try and time the trade. The technicals
have to be there. :)
You are right in that simply buying because vol was apparently low,
would not be reason enough to take the trade.
Walt
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