FCOJ still costs me the same at Wholefoods but should we not see a discount being futures are lower by 20% in the last five months. The line in the sand appears to be $115 the same level that has served as support on all attempts in 13′. I am expecting the lower red horizontal line to serve as stiff support and believe we could see prices into early 14′ make make their way back to the upper red line as seen in the chart below.
Weak demand not from my household but overall in the US the lack of appetite for Vitamin C in combination with lack of weather threats to Florida’s groves in this year’s hurricane season has accentuated the move south in OJ futures. From a technical perspective futures appear to be overextended and if today’s action proves to be more than a fluke and we experience some follow through do not rule out short covering. A trade back above $130 is my current call.
Now for the trade:
- Long January futures and buy $120 puts 1:1 for a safety net. Futures closed today at $121. You have two months time and $150 of risk if futures collapse. If futures make you money your protection will cost you $608 and work against the futures profit. That being said you would need to see an expiration north of $125 to B/E if held until expiration. In a perfect world you see a spike in the coming weeks and liquidate both legs and you should have time value…you make money on the futures and retain some premium on the put options.
- Another choice with not so many moving parts would be too simply buy January $125 call options. Total cost(risk) as of today’s settlement $458. 58 days until expiration and a current delta of 39%.
Once long help the cause and drink your juice!
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