Sugar Options Commentary 2nd September 2010
Published: 09/02/2010, 9:37:00 PM
J&C Commodities
Sugar Options Commentary
2 September, 2010
2:15 volume in NY Options 28064c/10129p
Forget about the Fund Selling in the V 2200c, we are intrigued by the continued size that trades in the H/K +110 calls. Another 2000 blocked today.
- Various bot 1500 V 2000c @ 95 vs V=2055
- B&D sold 3000 V 2200c @ 27-28
- JSG bot 500 H 25/30 call spreads @ 43-44
- JSG sd 500 F 2125/2300 call spreads @ 40
- JSG sd 500 F 2150/2300 call spreads @ 32-33
- J&H bot 500 H 20/24 call spreads/sd 500 H 1800p @ 3-4
- E Coast bot 2000 V 1850p @ 4-5
- ICAP bot 1000 (sd 500) H 24/30 call spreads @ 65 vs 2015
- ICAP and E Coast Block total 1750 H/K +110c @ 65
Commentary
We heard from another analyst, who was at the conference in India, that one of the larger trade houses estimates India production to be 25.868 million tons with 1.09 in export although they actually think the crop will be close to 28 million tohe V/H ns and exports could exceed 2.0 million tons. However, it seems to us by the way the market is moving that this number could be on the high end of expectations and the Q1 trade flows for 2011 could be at a larger deficit than previously thought. Volume was impressive in the futures and the V/H held nicely in advance of next week's Index Roll.
The large fund liquidated 3000 of the V 2200c. Not a big story considering these options are in the death spiral of time decay. The real interest should be in the volume of H/K +110 calls that have traded. With a value of 65 points, we wonder if the buyer is really anticipating a move to +175 in H/K or if this is short covering. We are thinking the seller is the trade house that got bullish this spread and is happy to risk being stopped out @ +175 on H/K.
We think H/N is a buy here as for some reason, the N has been propped higher than it should be. Many theories as to why N would see such an influx but we are thinking out loud if the reason is more due to Producers with margin problems as opposed to Fund Money coming into N because of the steeply inverted market.