Coffee Getting support from the Funds

As of this post coffee prices are higher by 4.44% with prices approaching previous resistance just below the 50 day MA (light blue line) that was challenged last week. Prices appear to be on the rise as money managers bought the dip this week when prices were trading near three weeks lows. I anticipate funds piling into coffee longs next week buying upwards of 10,000 contracts as they re-balance their positions at the start of this new year. That addition would raise open interest by almost 8%. Producing countries will likely cap this market from raging  higher but I do think prices could gain an additional 5-10 cents from current trade especially if short covering plays out.

Coffee Futures chart of January 3, 2014

Coffee Futures chart of January 3, 2014

Coffee Futures Trade ideas:

  • Long (1) in the money March $115 call for under $1800 and sell (2) March $125 calls for $525 per. You would collect just over $1000 and pay $1800 so out of pocket premium is $800 plus three transaction costs. I see a grind higher so you may be able to offset on higher trade or hold until expiration as I do not see future sustainable above $125 considering current supply and demand. The trade has 41 days and currently has a favorable delta of 13%.
  • Long May futures and sell an out of the money May call 1:1. Selling a $120 would give you just better than a $2000 cushion. You should pick up approximately 1/2 of the underlying move. 99 days until expiration and look for an exit if futures were to rally 5-10 cents rally in the coming weeks. Offset both legs at the same time.

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Bradbard Research

As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 312-870-1653

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.
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2 Responses to Coffee Getting support from the Funds

  1. shivi jain January 21, 2014 at 7:04 am #

    Good blog, very useful content and information shared Check commodity tips

  2. Brian October 15, 2015 at 10:06 pm #

    Hi there,i wish i can tell you a holy grail of trading but ututrnfnaoely there is none.How to win more in forex?1) Proper money management is a must. You may win 5 trades but with an over risked position, one losing one may wipe your account2) Hardwork. Read the news. Know of upcoming high risk event and news releases and stay out of them3) Know the currency pair you are trading on well. How does it usually react during the US/London/Asian markets.Do all this and you may finally make it to the 5% of folks who gained in forex.Cheers and all the best.I write about forex articles in my blog for newcomers.

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