Sugar Options Commentary 15th March 2010
Published: 03/15/2010, 6:48:00 PM
J&C Commodities
Sugar Options Commentary
15 March, 2010
A very light trading day in the options but 1 Paper Entity bot close to 10000 N 2500c. Most interesting was the fact another paper broker sold them 2200 lots piecemeal. We think it is a new long position.
- JP Morgan bot 10000 N 2500c @ 32-37 (MCQ sd them 2200)
- B&D bot 500 H 1825/2200 call spreads vs the 1500p @ flat
- B&D bot 500 V 19/21 call spreads vs the 1500p @ flat
- FC Stone bot 1000 K 2500 syn calls @ 12
- FC Stone bot 1600 N 18/20 fences @ 10-15
- FC Stone bot 1000 N 1850/20 fences @ 30-32
- WP buy 500 M 24/27 call spreads/sd 1250 M 27/33 call spreads @ 8 (2 x 5 ratio)
Commentary
We think there is some trade interest in getting long again via options. The 10000 N 2500c seem like a new position and the V and H call spreads vs puts are a bull play as well. However, we have mentioned on many occasions that the proverbial "lead weight" to this market is further fund liquidation. Concerning this idea, we saw the latest CFTC report stating that funds had reduced their net longs to below 100,000 contracts. At the same time, others have alerted us to a report from a major Bank that states managed money has taken $3.3 billion out of the softs markets since January. Therefore, we cant understand why the ICE is releasing Open Interest Data today showing K was up by 5700. All these numbers do is increase the uncertainty in a market meltdown because traders sense a large close out in positions but no real method exists to show how deep the scope of liquidation really is.
If we are looking for the next big excuse for more fund selling, it appears to be arriving in the form of more talk of China of raising interest rates to preempt any speculation bubble. However, it appears to us that China Raising Interest rates will only put more pressure in them to revise the Yuan and make the US$ even weaker as the Fed is Handcuffed in Raising Rates due to the poor employment numbers that continue to exist. The bottom line is that this act might actually be a nice time to try and pick a bottom.
Traders still forget we are in a deficit situation for short term and are tipsy from drinking the kool aid of revised production numbers for India, etc. Repeated attempts of fund liquidation might set up several attractive levels for buying underneath. Also, if we can stay somewhat close to the key level of 1973 in K, we will begin feeling confident in being long again.