OI in SP Options & Cotton Strategy

May 13th, 2009 Posted in Uncategorized

Upon reviewing the Daily Bulletin for the Emini-SP500 options, in my opinion the bulk of Open Interest for the July options expiring this Friday is at the 900 strike. See the excerpts of the bulletins below:

What this tells me is that the most disappointment can be delivered to the bulk of this market's participants if we settle at that 900 level come Friday. Absent a major catalyst to knock the market for a loop or rally it to the extremes, my bias would be to buy dips below 900 or sell rallies above 900 and look for that 900 level as a bullseye for settlement at the end of the week.

December '09 Cotton futures have been on a tear to the upside and now is finally showing signs of a possible retracement. If so, this will set up a momentum trade that will look to get long this market on this pullback. See the following chart for the specifics of the strategy:

Save for oilseeds, hard red spring wheat, deferred rice contracts, and interest rate futures, the bulk of the futures contracts today are lower. Soybeans, especially old crop, have been notably resilient. Cuttin' time will soon be upon us for winter wheat, so maybe I will start checking out spreads between the Minneapolis (Spring Wheat) and Kansas City (Winter Wheat) markets. I'll get back to you on that if I see a reasonable play.

Bob // 1.312.987.2053 // 1.800.388.0998