OJ is usually a rather quiet market. We have seen this market quietly move up to and through 2.00. This market is thinly traded and has a tendency to pullback after hitting new highs. On the longer term charts you can see that we have just hit very significant long term resistance. This should prove to hold this market back in the near term. This trade is designed to catch a move lower based on this overhead resistance while keeping risks in check.
click on the chart to enlarge
Buy one February 2007 Orange Juice 195 put and at the same time, sell one February 2007 180 put for a combined cost and risk of 3.0 points ($450) or less to open a position.
Max profit, assuming a 3.0 point fill, is 12.0 points ($1800) and occurs with March 2007 Orange Juices trading at or below 180.
Max risk, before commissions and fees, and assuming a 3.0 point fill, is $450. This occurs at expiration with March Orange Juices trading above195, break even at expiration is 192.
Odom & Frey
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