Sugar Options Commentary 10th March 2010
Published: 03/10/2010, 8:03:00 PM
J&C Commodities
Sugar Options Commentary
10 March, 2010
Not many days where the market is 150 lower before the options open outcry has even started. Volume in the options was very robust and volatility actually picked up as paper appeared to buy call spreads.
- S&P sell 4000 K 2000p @ 147-162 (we think this is profit taking from the original trade back in February when a large fund bot 15000 K 1800p, rolled it to 2000, and now selling out)
- E Coast buy 2000 K 22/24 call spreads @ 24-25 vs K=1950
- Paper sells 1000 K 20/24 call spreads @ 78 vs K=1950
- FC Stone sell 2000 V 2000c @ 112-115 (we wonder if this is somehow connected to the many V2010 20/30 call spreads the same brokers bot during the run up in fut)
- Capital buy 1000 V 2800c/sd 1000 V 1950p @ 235-240
- JPM buy 1000 N 21/24 call spreads @ 45 vs K fut 1950
- FC Stone sell 2000 K 2500c @ 13-14
- FC Stone buy 2000 K 22/25 call spreads @ 32
Commentary
Even by recent standards, today's sugar market was one of much confusion and uncertainty. The electronic market was 150 lower before the NY options opened and from there, rallied back to almost unchanged. The 2006 high of 1973 was the mega magnet and sure enough, we pulled tantalizingly close to that level by the close and left enough people to question whether we would plunge further into the abyss or see some semblance of a rally. The general attitude we witnessed was one of traders just wanting to step aside and let the avalanche continue instead of trying to rush in and get bloodied. We hear snippets of some offtake today but probably wont be enough to really change opinions for the moment. Even more confusing was the fact the ICE reported open interest only 1300 lower. In the light of confusion put forth by the ICE regarding abandoned calls after the H expiry, we find that number to somehow not be 100% credible- especially in light of what appears to be a major market capitulation.
In the options, it appeared the major fund that had bot K 1800p and then rolled them to K 2000p sold out 4000 of the 2000p longs. Since they had 15000 of these puts as longs, we think they have 11000 more to sell. At the same time, we saw trade start to buy large scale call spreads in K and N. Finally, more selling of V 2000p and we wonder if somehow this is related to unwinding the heavy size in the V10 20/30 call spreads that were bot when we ran up to 3000. It appeared volatility levels did pick up as traders try to get long wings in advance of another breakout.
We cant really say today was the worst yet. Perhaps we will have an easier time deciding if Chipper Jones is a 1st ballot hall of famer or if Andrew Jones even deserves to be in the Hall Of Fame.