Below is an illustration trading futures options on Coffee (KC) traded on ICE. Our post shows bullish and bearish positions using a combination of call and put options.
Trade Options on Futures
Coffee KC * Directional & Neutral Positions
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Volatility
Options fall into the category of being slightly overvalued in non-volatile markets in the weekly options report.
Notes:
Contract Size - 37,500 pounds.
Tick Size: 5/100 cent/lb., equivalent to $18.75 per contract.
Trading Hours: NEW YORK 4:15 AM - 1:30 PM ; 04:15 - 13:30
* Tip: Understanding what the numbers mean when looking at Coffee prices traded on ICE Exchange. The quotation you see is U.S. dollars and cents. Each contract you are buying or selling is 37,500 pounds. A 1 tick move is 5/100 cent/lb., equivalent to $18.75 per contract. March, May, July, September, December.
?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here to read a helpful tip about Natural Gas futures and options
Coffee Charts
* Tip: To view a larger chart image, simply right click on the image with your mouse. Next, select view image (or open image in new tab).
?ml=1" class="modal_link" data-modal-class-name="no_title">* Tip: Click here on enlarging images
Strategies
The % yield shown in the diagrams below represent an estimated return on margin from projected dates shown below. The structure has positive time decay which is an advantage over holding outright options.
Below is a bullish calendarized Fly with positive Vega should implied volatility increase and coffee continues directionally higher.
Below is a calendar put for a bearish directional play. The spread also has positive Vega for potential increase in implied volatility.
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