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Phillip,
This trade is not too bad IMHO my historical charts show a down move
usually follows in the beans from Sep into Oct which is often a low. The
news is saying we can expect another record crop. I would probably wait for
a day or two to see if the volatility drops further. May I suggest that you
bid lower than the closing price of 21. Also the 500 Jan call closed at 10
if the data I’m looking at is right. That’s 11 points less and more in the
money than the 525 call. I would rather see a mature congestion pattern
than the slow death of the down trend. I have watched prices go nowhere for
3 months esp. In Eurodollars. One of the ways to determine cheapness
of options is to compare the price to the recent price history. These type
of charts are not so easy to come by if you don’t subscribe to receive
options prices.
Best Regards,
Brent
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The workings of the newbie's mind will be evident
in the post below, but I would very much
appreciate the feedback of the resident options
aces.
Buy 2 January soybean 525 calls @ 21
Sell 1 January futures at the market (assuming it
stays reasonably close to Friday's close at
628.25.)
Reasoning:
- Have read that low volatility often precedes
substantial moves (for example, the
Raschke/Connors hisvol. gambit: if the 10 day
falls below the ½ of the 100 day etc.). Seems
hisvol. is currently low in the beans.
- Low implied volatility here, so the options
ought to be good value. I am using the options
ranking at cyberramp and also the "ticks over
fair" at pmpublishing. But is there a set formula
I can use to gauge when an option is really cheap
or not, some criterion I could apply?
- The trade is pretty well balanced from a delta
standpoint: position delta +1.08. I've been told
that this would enable me to profit either way, as
long as the beans really do move. I'm not so very
adept at making directional calls, but don't the
beans look like the proverbial "historical
opportunity"?
- Jan. calls have 106 days to expiration.
Something's gotta give by then, no? I mean,
they're not gonna go sideways for 3 months!
(Famous last words.)
- Other considerations: commercials are very long
(97% on COT index); 7-year price low.
I could also use some pointers in calculating how
far price would have to move for the position to
be profitable.
Thanks,
Philip
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