If Oil stabilizes, will sugar?
On the radar:
*Sugar prices have softened due to ethanol demand destruction, but if oil stabilizes so will sugar.
Buy july sugar 11.25 calls.
The seasonal low for July sugar isn't due for another two to three weeks but given the fact that prices are approaching long-term support, a reversal could occur sooner. Like crude oil and corn, the Covid-19 lockdown has impacted sugar due to demand destruction for fuel (ethanol). However, with the stock and oil markets pricing in stability, sugar could soon follow.
We like the idea of buying cheap call options to keep risk low and limited. Specifically, the July 11.25 calls for about 27 ticks ($302.40) plus transaction costs seem to be a good play. This option was trading well into the $3,000 price just six weeks ago. If sugar flatlines or moves lower, the risk on the position is limited to the cost of entry (about $300). Also, if we see a breakdown into the 9.00 cent range, we would likely be willing to get more aggressive with bullish plays.
Margin: $0
Delta: .27
Zaner360 symbols: OSB-MN20 C0.1125
Buy july sugar 11.25 calls.
The seasonal low for July sugar isn't due for another two to three weeks but given the fact that prices are approaching long-term support, a reversal could occur sooner. Like crude oil and corn, the Covid-19 lockdown has impacted sugar due to demand destruction for fuel (ethanol). However, with the stock and oil markets pricing in stability, sugar could soon follow.
We like the idea of buying cheap call options to keep risk low and limited. Specifically, the July 11.25 calls for about 27 ticks ($302.40) plus transaction costs seem to be a good play. This option was trading well into the $3,000 price just six weeks ago. If sugar flatlines or moves lower, the risk on the position is limited to the cost of entry (about $300). Also, if we see a breakdown into the 9.00 cent range, we would likely be willing to get more aggressive with bullish plays.
Margin: $0
Delta: .27
Zaner360 symbols: OSB-MN20 C0.1125
Author
Carley Garner
DeCarley Trading
Carley Garner is an experienced commodity broker with DeCarley Trading, a division of Zaner, in Las Vegas, Nevada. She is also the author of multiple books including, “Higher Probability Commodity Trading” and “A Trader's First Book on Commodities”.
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